Planning an estate requires several different considerations. A good estate administration plan in Maryland will address how much one can give, who will receive estate assets and when assets should be given. The first step usually is to calculate exactly how big of an estate one has available to give.
In order to do this, one will have to first calculate one's net worth, which is the total value of assets a person owns, minus total amount of debt owed to creditors. Assets will include bank accounts, investments, trust accounts and business interests. Debts will include credit card debt, mortgage debt, tax bills, education loans and business loans.
After a person calculates one's net worth, he or she will then need to calculate his or her required amount of assets needed to sustain oneself during his or her lifetime. This is known as a person's required base. This will allow a person to calculate how fast one should be spending money each year in order to stay on a financially sustainable track.
If one's net worth is more than one's required base, this means that a person will have an asset surplus. Subtracting one's required base from one's net worth will provide a person's asset surplus. This can then be utilized to help determine how much of one's assets are available to be given away during one's lifetime.
Once a person knows how much he or she has to give away during his or her lifetime, he or she can then have a better idea of the amount of assets to give away after is or her death. However, it is important to ensure implementation of these plans by creating essential estate administration planning documents. In Maryland, these legal instruments, such as wills and trusts, will make sure that intended beneficiaries will receive the correct amount of assets.
Source: Forbes, "Estate Planning 101: How Much Do You Have To Pass On?", Larry Light, Sept. 18, 2014