You are worth much more than your financial wealth. Your lifetime of wealth includes the sum of your experiences, knowledge, values, and moral guidance, as well as your accumulated financial wealth. But financial wealth is important in many ways. When you apply for a mortgage or car loan, the bank wants to know about your financial situation, not your life experiences. Similarly, your family will need your financial wealth to pay bills in your absence. You are taxed on your financial wealth, not your life experiences. When you plan your estate, your estate planning attorney needs to have an idea of your financial assets to draft a plan that achieves your goals.
For these and other reasons, it is important to calculate your net worth periodically. While this may sound like a daunting task it really is quite simple.
Step 1
Add up the value of your assets. Start with your most valuable assets, like your house, vacation or rental real estate, or businesses. Next, add the value of any significant tangible assets, such as your cars, boats, airplanes, tractors, equipment, etc. Add in the value of any intangible assets, like bank accounts, stocks, bonds, CDs, etc. Now, add in the value of your retirement accounts, like IRAs and 401(k)s. Note, retirement accounts often are not considered for financing purposes. If the calculation is being used for financing purposes during your lifetime, add in the cash or surrender value of any life insurance policies you may own. If the calculation is being made for estate tax projection purposes, add in the value of the death benefit of insurance policies on your life which you own. Finally, add in the value of any significant antiques, artwork, jewelry, or other miscellaneous items.
Step 2
Add up your total liabilities. These would include any mortgages, car loans, loans against your life insurance, and other loans. Finally, add in any other money which you owe to someone else. These are your total liabilities.
Step 3
Subtract your total liabilities from your total assets. This is your net worth. It’s that simple!
Periodically, you should revisit this calculation to assess your financial progress. It’s important to know where you stand so that you can plan to reach your future goals. For example, it might help to determine if you can afford to take a that big vacation, purchase that new car, or need more insurance. If your net worth is greater than $1 million, you may face an estate tax at your death. A qualified estate planning attorney can help you minimize those taxes and help you achieve your goals, and ensure your family is taken care of even after you’re gone.
Mr. Ronald “Chip” Morrison, Jr. is a board-certified estate planning attorney with experience in both simple and complex estate matters. He is a member of the American Academy of Estate Planning Attorneys and has been engaged in the practice of law for the last 16 years. Mr. Morrison can prepare an estate plan for you that achieves your goals of passing your assets to whom you wish and make sure that your selection of guardians for your children is heard by the court. The planning can even help minimize estate taxes.
For more information or to attend an upcoming seminar, please call our office, located in Metairie, Louisiana, at 504-831-2348 or contact us through our website.
- How to Leave a Mess to Your Heirs - January 30, 2023
- A Plan by Design or by Telephone? - January 27, 2023
- Planning to Benefit Non-Traditional Beneficiaries - January 24, 2023
