PEACE OF MIND
You Know What You Own? Americans’ median household net worth (meaning half the households have more and half the households have less) is around $193,000, while the average net worth is just over $1 million, according to the Federal Reserve, the central bank of the United States.
To determine your net worth, you first need to know what you have. The majority of Americans do not know their net worth. Your financial plan and your estate plan are deeply intertwined. Trying to create an estate plan without a clear picture of your finances is like planning a journey without knowing your beginning point.
Do you want to ensure that your loved ones are taken care of when you are gone? Do you want to leave a gift to a charity you care about? Do you want to ensure that the money you have saved and the assets you have acquired benefit the people and causes you care most about?
If so, start planning now. Your plan begins with an assessment of your net worth.
Net worth is calculated by subtracting your liabilities (what you owe) from your assets (what you own).
— Add up the value of all of your assets. Assets are the things you own that have value, such as cash, investments, real estate and personal property.
— Add up the value of all of your liabilities. These are your debts, including credit card balances, loans, and mortgages.
— Subtract the total liabilities from the total assets.
While this calculation is straightforward, you cannot figure out your net worth if you do not have an accurate picture of everything you own and the value of individual assets, which can be trickier to calculate.
Compiling an inventory not only helps you measure, grow and distribute your wealth; it also helps those who must step in if you become incapacitated (unable to manage your affairs) or when you pass away, such as your estate executor, trustees and agents under a power of attorney decision-makers.
Before meeting with an estate planning attorney, create a list that includes the following information: 1. Types of assets and detailed descriptions. Include as much information as possible about each asset.
For all financial accounts, list the last four digits of the account number, the full legal name of the financial institution or brokerage house and the type of account. Note if the account is held jointly with another person and specify their name and relationship.
List the named beneficiary for the account and any contingent (backup) beneficiaries, if you have already completed these forms.
— Bank accounts. — Investments. — Real estate: Complete street address, the legal description of the property as recorded in the deed, lender name, loan number, mortgage details (principal balance, interest rate, and monthly payment), ownership type and annual property taxes.
— Personal property: Vehicles (make, model, VIN and loan information), art, antiques, coins, stamps, jewelry and other collectibles (including any appraisals, provenance information, or insurance information), and items such as musical instruments or electronics with significant value.
— Digital assets: Online banking and investment accounts, online payment platforms (e.g., PayPal), cryptocurrency wallets, domain names, intellectual property and online businesses.
Include documentation that proves ownership of these assets, such as crypto wallet addresses and keys.
2. Acquisition date. Documenting when you acquired an asset can be helpful for tax purposes and tracking progress toward your financial and estate planning objectives.
3. Present value. An inventory is a snapshot in time and needs ongoing review and updates. Include any professional appraisals.
4. Storage. You should keep the asset list up to date and secure.
Your “wealth journey” starts here. You cannot get to where you want to go on your wealth journey if you do not understand where you are right now.
The first step of this journey is creating a current, comprehensive asset list and meeting with an estate planning attorney.
This article is provided as a service by the Law Office of Lasca A. Arnold, PLLC
Comment
Comments