How to Compute Your Net Worth

Do you know how much you are worth? If not, you can find out with a very simple calculation. Knowing your net worth is an essential part of estate planning. This figure tells you if your loved ones will have to pay estate taxes, how much you could lose if you don’t protect your assets and how well your estate is doing from one calculation to another.

Assets

The first step of net worth calculation is evaluating the present value of every asset that you own. For financial and retirement accounts, this is as simple as checking your current balance. For larger assets such as your home, you may want to have an appraisal done if you feel the value may have changed significantly since your last assessment.

Debts

The second piece of the net worth puzzle is debt assessment. Make a list of all of your liabilities: mortgages, car payments, and credit card accounts.

Calculate

Finally with the value of your assets and debts, you can calculate your net worth with this simple equation: subtract your debts from your assets. This is the current value of your estate.

If your net worth is a negative number, you should work on debt reduction. If your net worth is high, you may want to speak with your attorney about asset protection measures as well as methods to reduce estate taxes for your family after your death.

You should reevaluate your net worth every one or two years when you up-date your estate plan. If you are not up-to-date on your value, your family may be affected after your death. If debts are more than your assets are worth, your family will be left with nothing, and if your estate is large their inheritances may be hit hard with estate taxes.

Larry Parman
Attorney at Law