Understanding the Basics

How Big Is Your Estate?

Although there are some general strategies to follow for all people, if you have money and property valued at more than the applicable exclusion amount ($11.58 million in 2020 and $11.4 million 2019) when you die, there are some extra steps you will need to take today. Thus, the first step is to estimate the value of your estate.

What Is Included in Your Estate?

The assets and debts that you leave behind are collectively called your "estate." The value of your estate is calculated on the date of your death (or, in some cases, six months later). Your estate includes the fair market value of all assets you own outright and one-half the value of property owned jointly with your spouse. Any joint property you own with anyone else is included in your estate either (1) at full value (if you cannot prove your original contribution) or (2) at your share of the value (if you can prove your contribution). A life insurance policy in which you hold certain rights is also included.

You have to include the value of IRAs, 401(k) accounts, and even money people owe you (such as loans you made or money you earned and haven't received yet). You are allowed to reduce this amount by debts such as medical bills, mortgages, and bona fide personal loans; taxes due; charitable transfers; exemptions; and certain deductions, such as the unlimited marital deduction.

What Is Your Estate Worth?

Add up everything you own and subtract everything you owe. The amount left over is your "net worth." Certain adjustments are then made to determine your estate net worth.

See the "What's Your Estate Worth?" worksheet to help you with this calculation.

IMPORTANT NOTE: If you have made taxable gifts in the past, e.g., given an amount in any single year that exceeds the annual gift tax exclusion ($15,000 in 2020 unchanged from $15,000 in 2019), you may need to adjust your estate calculations. As you review this worksheet with your attorney, he or she can assist you to make sure you have included all your assets, liabilities, and taxable gifts.

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