Four Steps to Reaching Your Retirement Goals

Understanding what your estate is worth can help ensure your planning efforts are on the right track.

Taking stock of what assets you own and their total worth is an important step in financial and estate planning. Having a full picture will help you determine how much is likely to be passed on to your heirs. Who will inherit a summer house, for example, that's increased in value significantly over the past 30 years? One essential action you should take is to review your situation annually to address major changes, such as a large increase or decrease in the value of your noncash assets. "If you don't have an up-to-date picture," says Christine Fahlund, CFP®, a senior financial planner with T. Rowe Price, "you might be overestimating or underestimating the value of your estate and the amount each of your heirs is likely to receive."


Add up the assets. T. Rowe Price's online estate planning worksheet helps you estimate the size of your estate by giving you a series of questions and prompting you to list your assets, their value, and the heir or heirs you have designated to receive them, either individually or as joint owners. You'll discover through this exercise whether your heirs will receive close to the portion of your estate value you had originally planned. Says Fahlund, "You should review the value of your assets regularly, especially if you plan to leave some of them to your heirs through the beneficiary designations on your retirement and taxable* accounts."

Keep taxes in mind. For most investors, the size of their own estate or, if married, their joint estate, will not be an issue from the perspective of federal estate taxes. The tax law Congress passed in 2013 sets an estate tax exemption limit that adjusts with inflation. The exemption amount currently sits at $5.34 million per person. If you are married and the first spouse to die does not use any or all of the entire exemption amount, the remainder is passed to the surviving spouse, to be added to his or her own exemption amount at the time of the survivor's death. State estate taxes, however, may still be an issue, depending on your state of legal residence at the time of your death (assuming the spouses are U.S. citizens). In many states today, these exemption amounts are much lower than $5.34 million. Therefore, be sure you check with an estate planning attorney in your state of legal residence to determine if this may be a concern for you and your heirs.

If you have life insurance with a cash value, you may have heard that one of its advantages is that its cash value won't be taxed as income while you are alive, but many people are not aware that the death benefit will be included in their taxable estate unless they take special action. If you have (or plan to purchase) sizable policies on your life, it may make sense for you to fund an irrevocable life insurance trust so that the death benefit will not be included in your taxable estate. However, the IRS rules for these trusts are complex, so it is essential to consult with an estate planning attorney first.

Seek regular appraisals. Obtain up-to-date values on your noncash assets when estimating the size of your estate. If you own a small company, for example, have it valued periodically, as business and economic conditions change over time. If you have a special asset you wish to pass along to members of your family—a summer home, for example—you should have it appraised. If it is located in a state other than your state of legal residence, you should investigate the best way to have the property title written to potentially avoid having the asset pass through probate in that state. Low-basis securities, such as stocks you've held for years, need to be factored in at today's market values, as well. Explains Fahlund, "Not accounting for recent changes in the value of your assets could leave you with unintended distributions to your heirs."


Be sure to review these important issues to help you prepare for the tax obligations that may incur.

Spousal exemption. When the first spouse dies, assets left to the surviving spouse are federal estate tax-free regardless of the amount, as long as the surviving spouse is a U.S. citizen. However, individuals frequently leave bequests to other individuals as well, such as children and grandchildren. Then the potential for federal and state estate taxes can come into play. Keep in mind that minor children cannot own property directly; generally assets are left to them in a trust.

Charitable deductions. The value of assets bequeathed by your estate to qualified nonprofit organizations will be eligible for an estate tax deduction.

Future taxes. The value of your estate may be less than the current federal estate tax limits, but this could change over time, as your assets grow or as tax laws are revised. And state laws differ across the country on how much of your estate can pass free of tax, so be sure to talk to an estate planning attorney who practices in your state of legal residence about your specific situation. Working with a qualified estate planning attorney can help you address many of these complex estate tax-related issues.


Determining the size of your estate should be a collaborative effort among you; your spouse; and your investment advisor, accountant, or estate planning attorney. Says Fahlund, "Understanding the value of your estate and how your assets will be distributed will go a long way toward ensuring that your heirs are provided for according to your wishes."

*By adding transfer-on-death instructions to the account.

ILLUSTRATION by Harry Campbell

1Make the most of your retirement assets by strategically allocating your contributions.
2STUART RITTER, CFP®, a senior financial planner with T. Rowe Price, explains who can benefit from Roth IRAs’ advantages.
3A Thoughtful Approach to Retirement Investing.
4When and how you start collecting Social Security will affect the total amount of benefits you receive
5Make your IRA contributions for 2013; invest your tax refund with direct deposit; a new way to qualify for premium services; and more.
6An investor survey shows that there is no one way to retire.
7"Stretching" an Inherited IRA offers your heirs the potential for decades of tax-advantaged growth.
8History shows why maintaining an allocation to stocks and bonds that is appropriate for your financial goals can lead to long-term growth.
9Work toward the future you want by taking action today.
9Understanding what your estate is worth can help ensure your planning efforts are on the right track.