Making The Choice to Do Financial Planning

During estate planning, understanding the value of your estate and all its parts is key to achieving your goals. But valuation is more than just knowing what assets are worth today. It also involves planning for the future value. How can an accountant help you with this difficult task? Here are a few ways.

1. Estimating Market Changes

Nearly all assets will experience ups and downs in their market values. And although a lot of financial planning can simply focus on the current value of your assets, estate planning means planning for something that may not happen for decades.

Unfortunately, no one can foresee market changes with 100% accuracy. But a professional estimation based on things like past growth history and trends in the market can help you get close. Armed with this knowledge, you can determine the best and fairest division of assets, prepare heirs for their inheritances, and make charitable legacy arrangements. 

2. Forecasting Business Income

Do you own or have a stake in a business? Business valuation is a tricky task at best. There are a wide variety of methods to value the business, including valuing its hard assets, determining the worth of its intangible assets, and estimating future income potential. Each approach can result in very different present valuations and future expectations. 

Forecasting for a small business also inherently has challenges that you may not encounter with most assets. For instance, the value of your business may be very different without your active participation if you pass away. The accountant will have to take into account what you bring to the table and how the business would fare without you. 

3. Accounting for Tax Effects

Taxes can take out a big chunk of your estate if you fail to plan properly.  

Technically, all estates are subject to federal estate taxes. However, many estates qualify for an exemption of up to $12,060,000 (as of 2022). While your estate may not be so large as to reach this threshold right now, what might it look like in a decade or two when you pass away? In addition, how will your heirs be affected by things like income and capital gains taxes? These are important questions to answer early.

Where to Start

Want to know more about how to figure out the future values of your estate and what it means for estate planning? Start by meeting with an accountant in your state today.