Figuring out the value of your estate is a significant task you need to do. If you’re unaware of the Federal and state laws, you will question why you need to calculate the valuation of your estate? Firstly, the valuation of your estate is the key factor that will help you create your estate plan. On the other hand, figuring out the valuation of your properties will help you determine whether you need to pay taxes to the Federal and state government against your properties or not.
Not all assets and properties are subject to taxation regulations. If you own a small estate with a lower valuation, you won’t need to pay taxes for owning the property. Owning a massive property or estate means that you’re supposed to pay certain remunerations as taxes. If you haven’t cleared your property taxes, you owe the amounts to the government and you’ll be taken under legal consideration on the detection of the situation.
How to determine your estate’s value?
If you’re up for calculating the valuation of your estate, you are supposed to build familiarity with the terms- gross estate value and net estate value. Ideally, property and estate taxes are calculated based on the net estate value of your property.
Firstly, you are supposed to get information about the gross estate value of your property. In simple words, the gross estate value of your property stands for your property’s value before excluding the debts and taxes from it. In this case, you’re considering the overall value of your property including everything.
In the second scenario, you have to calculate the net value of your estate where you will exclude the debts and taxes on yourself. This stands for the net value of the estate asset owned by you. Eventually, you’re supposed to pay taxes for this particular value of your estate.
Steps To Calculate The Valuation Of The Estate Assets Owned By An Individual
- The sum of the values of all real properties on the date of calculation
Most individuals aren’t familiar with what real property defines. To be specific, real property means the homes, businesses, and rental properties owned by the owner of the assets. Remember that a licensed appraiser holds the authority to calculate the valuation of the real property assets owned by someone. If outstanding mortgages exist against the properties that are being calculated, the value of the mortgages needs to be deducted from the overall value of the properties.
Determining the values of financial accounts
After real properties, the collective value of all the financial accounts governed by an individual is taken into consideration. However, there are some exemptions as well. In the case of a joint account with a spouse, half of the account’s value will be considered as a financial asset. On the other hand, if the individual is the sole owner of the account, the entire amount present in the account will be considered as a financial asset.
Properties that were owned jointly
In the case of jointly-owned property, the entire value of the property is considered under estate and is taken into consideration for calculating taxes. Now, what if the surviving partner-owner attempts to buy the property? In such a case, the amount the surviving partner-owner pays to buy the property will get excluded from the estate valuation.
Life insurance policies
Almost every individual has some life insurance policies he accounts for. If the estate owner himself was the beneficiary of the insurance policies he accounted for, the value of the life insurance policies will get included in the estate. Even if the owner is not the beneficiary, the policies will still be counted in if the policies are payable to the estate by any means.
Other assets that can be accounted for
The above-mentioned assets are not the only ones that an individual owns during his lifetime. Apart from these assets, an estate owner also owns jewelry, vehicles, digital assets, and others. The overall valuation of all these physical and digital assets that the estate owner owns are calculated under the estate valuation.
After summing up the values of the assets and properties, you are supposed to deduct the expenditure, liabilities, and taxes that the estate owner pays or owes. All utilities including- medical expenses, loans, credit card accounts, mortgages, charitable deductions, payable taxes are considered deductible expenditures from gross estate valuation. The expenses till the date of valuation calculation are usually deducted to determine the real estate valuation.
This is how you’re supposed to calculate the valuation of your real estate assets officially. As you calculate the valuation of your property, you’ll be able to determine how much tax you need to pay against your estate assets. So, get your estate valuation calculated today for your own good.