Getting started on your estate plan: Inventory and value assets; estimate tax liability

If you’ve decided it’s time to create your estate plan, congratulations! A good place to begin is to work with us to determine what your estate is worth and whether you need to worry about estate taxes.

What is your estate worth?

First list all of your assets and their value. If you’re married, prepare a similar list for your spouse’s assets. And be careful to review how the assets are titled, to include them correctly in each spouse’s list.

If you own a life insurance policy at the time of your death, the proceeds on that policy usually will be includable in your estate. Remember: That’s proceeds. If your estate is large enough, a significant share of those proceeds may go to the government as taxes, not to your chosen beneficiaries.

Is your estate liable for tax?

Here’s a simplified way to project your federal estate tax exposure: Take the value of your estate, net of any debts. Also subtract any assets that will pass to charity on your death. Then, if you’re married and your spouse is a U.S. citizen, subtract any assets you’ll pass to him or her. Those assets qualify for the marital deduction and avoid potential estate tax exposure until the surviving spouse dies. The net number represents your taxable estate.

You can transfer up to your available exemption amount at death free of federal estate taxes. So if your taxable estate is equal to or less than the estate tax exemption (for 2016, $5.45 million) reduced by any gift tax exemption you used during your life, no federal estate tax will be due when you die. But if your taxable estate exceeds this amount, it will be subject to federal estate tax.

If you’re not sure whether you’re at risk for the estate tax or if you’d like to learn about gift and estate planning strategies to reduce your potential liability, please contact us.