Tracking Income / Principal
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An estate's value consists of principal (the core underlying assets of the estate) and income (money generated and retained by the estate during administration, such as interest on a bank account).
Most estates can safely ignore the distinction between principal and income... unless the terms of the will or a Family Entitlement specify that an heir is entitled to income generated from a particular asset or the estate overall (as opposed to simply giving an asset to the heir and letting that heir naturally enjoy the income it generates).
On the other hand, trusts are required to distinguish between principal and income... unless the trust's governing document explicitly waives this requirement (such as when establishing a so-called "unitrust").
General Background
At death, all estate assets are considered principal. Over time, transactions and market value changes may increase or decrease that principal, transactions may introduce income to the estate, and transactions may reduce that income (by spending it on expenses or distributing it to heirs).
Behind the scenes, EstateExec automatically tracks estate principal and income separately, classifying transactions and their impact according to the current situation. You don't normally have to do anything – but there may be situations in which you will want to override EstateExec's defaults to more appropriately reflect a given situation, and ultimately you have the final say and responsibility for determining these classifications.
See Income and Principal for more information.
Overall Estate
To see the principal and income portions of the net estate overall, select the View | Income and Principal menu on the Overview Tab.
You cannot directly set the principal and income portions of an estate: these are automatically calculated from the assets and debts (note that estate debts are subtracted from overall asset principal when calculating these net value numbers).
Each Asset
To see the principal and income portions of an asset's current value, display the Income and Principal columns via the View | Table Columns menu on the Assets Tab.
To see only principal assets, use the Principal column filter in the table header to show only assets with a principal value >$0 (income assets can be shown by filtering via Income column).
If you want to directly set the principal and/or income portion of an asset's value, you can do so via an Adjustment transaction (either by clicking on the asset's Value Now column on the Assets Tab, or by creating such a transaction on the Cashflow Tab). Unless the change is due to an underlying market value shift, however, it's usually best to impact these values via transactions that inherently explain the reason for the change (e.g., Interest Deposit, Distribution, Debt Payment, etc.).
Individual Transactions
When you enter a transaction, EstateExec automatically determines whether that transaction should be related to an asset's income, its principal, or both (see Income and Principal Accounting Rules for more information, and note that while EstateExec's default determination is usually appropriate, there are certain situations in which you may wish to override those defaults).
View Existing Transaction Allocations
To see individual income and principal portions of existing transactions, display the Income and Principal columns via the View | Table Columns menu on the Cashflow Tab.
If for some reason you want to see a table of only those transactions that impact principal, or only those that impact interest, you can use the View | Include menu to select only the types you want.
By default, the Cashflow Tab shows the selected asset's current overall balance at the top of the Tab. If instead you wish to see the balance broken out by principal and income, click the payments icon next to that current balance. Note that if your display is too narrow, this information will be unavailable for display here, but you can always see it on the Assets Tab as described above.
Edit a Transaction's Allocations
When entering or editing a transaction, you can see the automatically allocated interest and principal amounts by clicking the icon next to the Amount, which will cause a detail row to appear immediately below the Amount.
Some transaction categories will allow you to override default allocations, while others (such as an Interest Deposit) will not, due to fiduciary accounting rules. You can override distribution allocations, but if the distribution is not yet done and is not a fixed amount, you will need to wait until you actually make the distribution and finalize the total value before you can override default income and principal allocations. Until then, these distribution values are assigned proportionately to the asset’s contents, and fluctuate with the asset's value.
EstateExec will usually show you how much is available in a given asset for a given transaction underneath the income and principal fields. It's not critical for you to understand this, but EstateExec uses slightly different terminology to describe what is "available" for a particular transaction.
- Available: For typical transactions, the available amount is the current value of the asset's relevant component (i.e., principal or income).
- Unclaimed: If you are defining a fixed amount distribution, the amount shown is labeled "Unclaimed", representing the current value of the asset's relevant component, minus any other defined fixed amount distributions that have not yet been made (i.e., have not yet been assigned a date). While you can set the new distribution to exceed this amount, we show this "Unclaimed" amount to help you understand what you have already specified so you don't inadvertently overextend the asset.
- Unallocated: If you are defining a percentage distribution, the amount shown is labeled "Unallocated", representing the "Unclaimed" amount minus the amounts associated with any other defined percentage distributions that have not yet been marked done. Since future percentage distributions are made with anything left over after any future fixed amount distributions have been satisfied, we say that those fixed amount distributions make a "claim" on the asset's value, while future percentage distributions merely "allocate" whatever is left over.
Note: If an asset does not contain enough income or principal to fund the default transaction allocations, EstateExec will automatically allocate the remainder to come from the other classification. If the asset doesn't have enough, but the estate overall does, EstateExec will warn you and suggest that you may want to initiate the transaction from another asset or transfer enough income/principal into the account to cover the desired allocations, or even to edit the transaction allocations to force the desired allocations, giving the account a negative income or principal balance (for now). See Handling Asset/Estate Differences.