2021 National Financial Plan Competition Case Narrative The Tubbs Family Relationship First Name Wife Bonnie Plan Preparation Date: Sam is the owner of Tubbs Painting Restoration. He started the firm 10 years ago. His business had to temporarily close due to COVID-19. He furloughed his employees, suspended his income and applied for an Economic Injury Disaster Loan (EIDL) through the SBA. A $100,000 loan was granted at 3.75% for 30 years. He is back working with his employees in addition to the building and assets in the business, the annual revenue is estimated at $400,000 per year (with 2 employees). The business equipment is worth $200,000. Tubbs Painting Restoration owns the building valued at $300,000. that houses his company outright and only occupies the lower floor. He has the upper floor leased, creating positive cash flow of $4,000 a month. The financial condition of his tenant is unknown as are their intentions regarding renewal. He pays himself $125,000 per year for calendar year 2020 which is projected to increase at 7% per year. Due to Covid-19, the volume of business is lower by 30%. This reduces his ability to contribute into his retirement plan. Sam is considering tapping into his 401(k). The long-term outlook for the business however, is very good. 2021 National Financial Plan Case Narrative 8/15/19 1 Age 49 Birthdate Husband Sam 46 1/1/74 2/2/71 Bonnies Son Niko 26 5/15/94 Bonnies Daughter Nancy 23 3/10/97 Sams Daughter Cindy 18 6/7/02

As the owner of the business, Sam will, at the time of retirement, convert his business structure to a retirement asset for himself and Bonnie. One of the employees or some other entity may be candidates to buy the business from Sam. A valuation for the business would need to be constructed and a mechanism to pay it to the owner. Sam would like an arrangement where he can continue in a consultative position after the sale of the business and receive additional income if he chooses.

Bonnie lost her job to COVID-19 on March 13, 2020. She received unemployment payments for 26 weeks, which was insufficient to meet the family income needs. To make up the difference, she tapped into her 401(k) (Under the new guidelines, she does not incur a 10% penalty for being under 59-1/2). She is an excellent manager and will find work eventually. The timing of the new job is of importance as it impacts current cash flow. She was earning $75,000 annually. Neither Sam nor Bonnie received PPP payments.

They currently live in Indianapolis, IN. They purchased their house for $350,000 3 years ago with 20% down. The balance is financed at 3.75% fixed for 30 years.

Bonnie provided health insurance to the family through her employer sponsored group. Once she lost her job, the family moved to COBRA at $2000 per month. Sam is considering purchasing group coverage through his business but would have to offer it to all eligible employees. This would include group life and disability of which now he has none. Are they eligible to purchase coverage through the ACA Exchange? Bonnies eventual new job may include health insurance. They are looking for advice for the best options for right now.

Bonnies mother does have a portfolio valued at $1,000,000 as of March 1, 2020. As of today, its value is $700,000. Right now, Bonnie is the sole heir. Her mother is 75 and widowed and does not own Long Term Care Insurance. Should her health change, this portfolio will be the main funding source to provide for her care.

Neither Sam nor Bonnie have wills, trusts, or any estate plans in place.

This is the second marriage for both Sam and Bonnie. Sam has a daughter Cindy from a previous marriage who currently lives with her mother. He has fulfilled his child support but still wants to pay for her college. Cindy just graduated and plans to attend community college where 2-year tuition is approximately $15,000 per year. Tuition inflation is expected at 7%. They want to know if they can afford this.

As part of her divorce settlement, Bonnie received a vacation home in Florida. It carries no mortgage. The family spends 3 weeks a year there and rents it out the other 49. This provides a net cash flow of $4,000 a month.

Bonnies daughter has been admitted to Medical School, Purdue University Fort Wayne the family is seeking help in navigating financial aid and student loans. They are wondering if they should co-sign student loans for Nancy.

2021 National Financial Plan Case Narrative 8/15/19

2

Sam has a $1,000,000 20-year term insurance policy which just started 2 years ago at a preferred rate. Bonnie has $2,000,000 term insurance taken out at the same time.

They own 2 cars that are valued at $40,000 total. The truck that Sam drives is expensed to the Business. There are no car loans.

Sam maxes out his Roth IRA Contribution and currently is at $68,000. Bonnie has $50,000 in her Roth IRA and would like to max hers out too.

Family Living Expenses (Pre Covid-19)

Mortgage/Property Tax: $1950/mo. Food: $800/mo. Vacation: $15,000/yr. Charitable: 7% per yr.

Clothing: $850/mo. Home Maintenance: $350/mo. Utilities/Cable/Internet: $750/mo. Auto Maintenance/Fuel: $500/mo. HO & Car Insurance: $650/mo. Cell Phone: $150/mo. Entertainment: $500/mo. Sam Term Insurance $2000/yr. Bonnie Term Insurance $2200/yr.

General Stated Goals

• Generate a plan to accomplish protection of assets for legacy planning and multi- generational planning and business succession planning.

• Have Sam transition out of the business by age 60 and both retire at that point

• Evaluate whether they currently own adequate insurance

• Obtain clarity on how to survive Covid-19 ramifications and how to move forward

• Pre-Retirement Growth

• Retirement Moderate

Risk Tolerance:

2021 National Financial Plan Case Narrative 8/15/19

3

Updated information from the IARFC (update provided Nov 2.)

1st Both Sam and Bonnies accounts are Roth IRAs (error the accounts were listed as 401k and should have been Roth IRA)

• The amount of the Roth IRA is listed in the narrative - see Pg.3

• Sam maxes out his Roth IRA Contribution and currently has $68,000 in his account. Bonnie has

  $50,000 in her Roth IRA and would like to max hers out too.

  2nd - Value of the Florida vacation home - $425,000

3rd - Value of the Indiana home - $380,000

4th -The Table of Contents is developed to make all cases formatted the same. The students should use the complete TOC to present their plan.

5th - Asset Allocation The Student would enter the Risk Tolerance from the Narrative for the Asset Allocation.