How to set up a balloon payment on a liability


Our interface does not currently support lump sum payoffs of liabilities at a specific date.  There is however a way around this limitation.

When trying to pay off a liability associated, whether it is associate with an asset or not, we will have to use the “Other Asset” account, so that we may have the option to liquidate the asset at a date in the future. 

The question you might have is: “Why do I need to add an asset if I am trying to only show a liability?”  The answer is simple, as an asset account has all the inputs for a liability as well. It also has the ability to be liquidated.

So, what happens when an asset, which has a liability attached to it, is liquidated?  Well, if the asset has a positive value, the system will pay off the outstanding liability with the proceeds of the sale. The net proceeds are then taxed accordingly.  However, if the asset has no capital value, the liability is simply terminated.

We can leverage this behavior and use it for the purpose of showing the impact of having a liability, and the payments against it, on the plan, and result of paying it off.

So, if the liability is terminated without an income to offset it, how can we show the impact of the payment?

We will have to create a one time expense, and set it to occur on the same year we extinguish the liability. This will take care of the cash flow event generated by the payoff.


Let’s review how to input this information.

First, browse to the Assets & Liabilities tab of the Client Data.

Add an Other Asset.

First, browse to the Assets & Liabilities tab of the Client Data.

Add an Other Asset.


Choose the Asset Type.


If this is a replacement for a loan you had currently entered for a real estate assets, you may want to choose the same account type.


Remember, if you are trying to add a balloon payment to a mortgage for an existing account, you will have to zero out the liability information on the actual home, so that the asset and the liability are split into two accounts.



Make sure you leave the left side of the screen blank (the Asset Details).


Fill out the information under the Liability tab.






Under the Liquidate Asset tab, select the check box marked “Sell Asset”.


Enter the year you want to pay off the liability.


Make a note of the value of the liability in the last year of the chart.  You will use this value to create the one time expense.





Navigate to the Cash Flow/Goals tab under the Client Data, and click on the “Other Expenses” button.



Click on the Add button, and enter the information in the “Add Other Expense” pop up.


Make sure to select the start and end age for the expense that matches the age of the client in the year you want to pay off the liability.


NOTE: On some browsers you will have to edit the end age first, and then the start age.





That is all!!! The system will now show correct values for the Net Worth. It will account for the liability payments up until the year you want to pay off the loan, and then show the one time expense in the year of the pay off.

If you wanted to be specific as to which account this money should come from, you can use the Custom Withdrawal Order, or perhaps manually key in a distribution from a specific account.


Here is how you can do that.

From the Assets & Liabilities tab, click on the “Withdrawal Order” button at the bottom of the page.



Rearrange the order of the accounts in which the system will make withdrawals if you want to give a general order of resources.



If you would like be more specific about which account the pay off should come from, open the account for editing from the Assets & Liabilities tab.


Then, at the bottom of the Account Detail screen, click the “Distribution Details” button.



From here, select the “Dollar Amount” option, and enter the amount of the payoff in the same year as you liquidated the Other Asset.





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