Many Massachusetts residents think about what will happen to their assets when they pass away. However, it is just as important to think about how those assets will serve a person while he or she is still alive. This is why the first order of business in estate planning is to determine just what an individual's estate is worth.
Since Americans are living longer, they need access to their assets for a longer period of time in order to provide for their care as they age. Without an understanding of what those costs may be, it can be difficult to create a plan. Therefore, the first step is to gather documentation regarding every asset and liability a person has in order to determine his or her net worth.
An individual's net worth is the amount of assets still available for use and/or distribution either during life or after death once all liabilities are identified. It will also be necessary to calculate the projected amount that will be required to maintain his or her lifestyle until death. These projections can sometimes involve complex formulas that take into account a variety of variables.
Most Massachusetts residents want to provide for their families -- both during life and after death. However, it is just as important that an individual make sure that he or she is provided for throughout his or her life. Otherwise, any gifts made during life or distributions after death could be negated by the need for family members to provide for the individual later in life. Estate planning that involves not only calculating net worth, but also making projections for what will be needed for the individual in the future can help achieve those goals.
Source: Forbes, "Estate Planning 101: How Much Do You Have To Pass On?", Larry Light, Sept. 18, 2014