Estate planning ensures that your wishes regarding what you leave behind are adhered to. But before you begin naming beneficiaries and divvying up assets, take the time to determine the actual value of your estate. Why? And how? Here's what you need to know to achieve your estate planning goals.
Why Value Your Estate?
Even if you generally know to whom you want to leave your assets, you should take inventory of the amounts you're leaving behind. There are several good reasons. First, if your estate may be large enough to run afoul of state or federal estate taxes, you may want to do additional tax planning.
Second, any estate with multiple heirs should be aware of how much financial value each party will receive. If you want to leave your two adult children equal parts, how will you divide it up? Will it be equal if you leave the house to one and a bank account to the other? What about differences in taxation on each? Valuation is the only way to know.
Finally, does your estate live up to your goals for beneficiaries? An estate may seem to have plenty of assets, but will it still be sufficient to support your family once debts are paid? Should you boost it with things like life insurance policies? There are ways to adjust your estate to meet your interests, but you can't do so if you don't know what you're working with.
How Can You Value Your Estate?
So, how should you go about putting a price tag on your estate? First, gather together statements and reports on all cash accounts and investments. These may only be 100% accurate on one specific day, but they give you an estimate to include.
Appraisals are the ideal way to value assets of potentially high value. You may need to pay an appraisal fee, but this is an investment in good financial planning for your loved ones. For less costly assets, you can often use market rates — such as through Kelly Blue Book or online marketplaces — to estimate what your heirs may get from selling an asset.
This process also helps you improve the value of your assets by encouraging (or forcing) you to include supportive documents like receipts, evidence of provenance, capital improvements, and more.
Finally, don't forget to factor in debts that would still be due by your estate. This includes most loans and credit cards in your name and usually half of any jointly-owned debts. Remember that your estate must pay legitimate debts before it is distributed.
Where Can You Get Help?
Want help putting together this and more information about your estate? Not sure how to value something? Start by meeting with an estate planning service in your state today. No matter what your goals are, they will help you reach them and care for your loved ones long after you're gone.
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