Estate Planning: Calculating Your Estate's Net Worth

The idea of creating your estate plan may have you intimidated for a very good reason. Creating this type of plan involves making decisions regarding almost every aspect of your life.



This includes your current affairs, possible future scenarios and events after your death. Anyone would feel overwhelmed by such decisions. Fortunately, you do not have to consider all of those affairs at once.

Determining Net Worth

The idea of calculating your net worth may not seem like a small or simple task. It does not have to be as complicated as you may fear. First, you need to determine the value of all of your assets. Remember, these values do not have to be exact, as rough estimates will suffice for now.



When it comes to your assets, you need to include property like the following:

• Bank accounts
• Jewelry
• Vehicles (cars, boats, etc.)
• Investment accounts
• Retirement plans (401k, IRAs)
• Business interests
• Life Insurance amount
• Real estate
• Funds owed to you



Depending on the size of your estate and your assets, you may have more or less to include. Calculating your net worth does not stop there.



You also need to consider your debts and liabilities, which may include:

• Credit card debt
• Mortgages
• Car loans
• Personal loans



Once you have a roughly estimated value of your assets and debts, you then subtract the debts from your assets to determine your estimated net worth.

Estate Tax vs. Inheritance Tax

Something to note is if the state you live in assesses its own separate estate tax, inheritance tax, or both. Inheritance tax is collected after someone’s death, which is similar to estate tax. However, inheritance tax is based on an individual tax bequest of property. The estate tax is assessed against the overall value of a decedent’s estate, all gifts made to beneficiaries. In Illinois, estate tax can range from 0.8% to 16%.



Even with an estate that is not near the estate tax limit, you still need to look at financials and understand why you need an estate plan. Probate can be very expensive and time-consuming in most states but this aspect can be easily  avoided.



Besides this, if you have significant retirement assets, own one or more businesses, or expecting a large inheritance, then you need an estate plan to:



• Ensure your property is managed by someone of your choice in case you become incapacitated



• Ensure your property goes where you want it to go without any interference from a probate judge



Regardless of your net worth, if you have minor children, have a blended family, own a home in two different states, or if you are single, you will still need estate plan to make sure that your assets:



• Can be managed by someone of your choice



• Go where you want it to go without any interference

Using the Net Worth

If you feel unsure about calculating your net worth, you do have the option of enlisting the help of financial professionals. Your net worth can help you determine whether your estate may owe federal estate taxes or inheritance taxes. Your net worth can also help you determine how you might want to divide the value of your estate among your heirs and beneficiaries.



Understandably, you may not fully understand how to implement your net worth into your estate plan. Luckily, in addition to financial professionals, you can also gain assistance from an Illinois legal professional. An estate planning attorney can help you review your estate and guide you during the decision-making process.

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