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Estate Planning: Part One

Today's post covers the first part of Estate Planning, which is concerned with determining your net worth. But, I'm going to leave it on a cliffhanger, so you'll need to check back in tomorrow.


To begin the estate planning process, you need to have an idea of what your net worth is.


First, determine all your assets. Remember from our discussion in an earlier blog post, revocable trusts, assets range from real estate, stocks and bonds and bank accounts. It also includes insurance, trusts, annuities, any business interests or any jointly held property or other assets. One thing to remember, if you are counting jointly held property, it has to be accounted for as to the share you own. Therefore, if you only own ¼ of a business interest, that’s all you could claim of the asset. Also, the value of the asset is determined now. It is not the value of the asset upon the day you bought it. Also, remember when adding the life insurance as an asset, it is the death benefit that will be included in your assets, not the cash value. Also, it’s wise to set a specific date determining the value of your assets. This helps because you can obtain the current market value of the assets and help determine your gross worth. You can always reevaluate your assets with another specific date at a later time. But having a specific date gives a standard to all the assets and debts.


Second, you need to make a list of all your debts. This includes credit card balances, loans (personal, student, auto, home) and any other outstanding debt. Again, having a specific date will help determine when debts would or should be paid off. Because you are determining your net worth based on your death, you may want to include an estimate of funeral and administrative expenses. Obviously, these expenses will vary, but you could budget a 10% debt for such things.


Third, subtract your total debt from your total assets. This number is your total net worth, and will determine how you will plan your estate. If you have a negative number, you may want to think of ways to reduce your debt and increase your assets. Also, based on a negative number, you may determine that a simple will would be the best path forward in your estate planning. See Randa’s blog on wills. But this net worth number will be the benchmark for determine your best path in estate planning.


Again, I have much more information for you, so make sure you come back tomorrow.