Statement of Net Worth: Definition, How to Calculate
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Quick Facts — Statement of Net Worth Lawyers
- Lawyers available: 13 estate planning lawyers
- Clients helped: 19 recent statement of net worth projects
What is a Statement of Net Worth?
A statement of net worth provides a snapshot of a person’s or business’ financial wealth. Statements of net worth are calculated by adding the value of all non-financial and financial assets owned by them and then subtracting the value of all its outstanding liabilities.
A statement of net worth is essentially a snapshot of a person’s or businesses’ financial position at any given point in time.
You can read more on net worth here .
How To Calculate a Statement of Net Worth
There are four steps to writing a statement of net worth:
- Calculate value of your assets : List your assets on a net worth statement. Using the current market value for each item, calculate the total value of all assets owned by you. Items like insurance policy also have a cash value which can be found on a schedule in the policy. Similarly, mutual funds, stocks, and bonds also have cash values that can be found on their quarterly reports.
- Calculate your Liabilities : Your liabilities should also be listed on your net worth statement. The balance owed on debts or credit cards, principle owed on a mortgage or real estate loan is considered a liability.
- Calculate the value of assets after subtracting liabilities: You will need to subtract the value of your liabilities from the value of your assets to determine your net worth. A negative net worth occurs when the total debt is more than the total assets. It is a sign that the company or individual needs to reduce their debt.
- Monitor your net worth annually: Complete a net worth sheet annually as your assets and liabilities might change or the values might change over time.
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What’s Included in a Statement of Net Worth
A statement of net worth largely includes assets and debts of an individual or business. Here are some types of assets and debts that might be included in a net worth statement:
- Savings & Checking Accounts
- Investments
- Life Insurance Policy
- Retirement Funds
- Personal Property
- Real Estate
- Credit Card Bills
- Mortgage Balance
- Car Loans
- Unpaid Taxes
- School Loans
A statement of net worth will include balance sheets, income statements and cash flow statements.
- Balance sheets : Balance sheets provide detailed accounting of a company or individual’s assets, liabilities and shareholders’ equity. Shareholders’ equity refers to the value that will be left if a company sells all its assets and pays off all its liabilities. This leftover money will belong to the shareholders of the company.
- Income statements : An income statement shows how much revenue a company made in a certain time period. In the case of an individual, it shows the amount of money earned by the individual in the time period.
- Cash flow statements : Cash flow statements report on a company’s inflows and outflows of cash. Cash flow statements can help determine if a company generated any cash. Cash flow statements can reflect the changes over time in income statements and balance sheets.
You can learn more about preparing your own statement of net worth here .
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Types of Statements of Net Worth
Types of statements of net worth can differ by entity. Companies, individuals, governments and countries use net worth statements in different ways. Here are how net worth statements are used by different entities:
Companies
Net worth in businesses is also known as equity. It is based on the value of assets and liabilities at the value expressed on financial statements. If items on the balance sheet do not express their true value, the net worth will also be inaccurate. If the accumulated losses exceed the shareholder’s equity in a company, the net worth becomes negative. Net worth here doesn’t express market value of the company as it may still sell for more if traded.
Individuals
For individuals, the net worth statement refers to the net economic value or the individual’s total assets minus the liabilities. Net worth statements can help individuals determine their financial status and plan for their future financial goals.
Governments
A government’s net worth, or a balance sheet of all assets and liabilities, is used to measure a government’s strength. Most governments use an accrual-based accounting system to provide transparency. Some might utilize cash accounting to better predict future fiscal events. Consistent accounting is necessary to determine the total net worth of a government.
Countries
A country’s net worth is the total net worth of all companies and individuals residing in the company plus the government’s net worth.
You can read more on types of statements of net worth here .
When Do You Need a Statement of Net Worth?
A net worth statement can help you measure progress towards long term financial goals. It can also help you keep track of your debts. If you are building wealth, you will also see your net worth statement changing. Having multiple savings, investments and debts can be difficult to manage. A net worth statement can help see your total financial situation.
A net worth statement also contains the value of your home and contents and can help you decide the homeowner’s insurance you will need to purchase. The total of your liquid assets can also provide information on how prepared you are for an emergency. A statement of net worth can also help you analyze your retirement savings or create future financial plans.
Companies use statement of net worth to assess the value of the company. Governments and countries also use statement of net worth to assess government debt.
Statement of net worth can often be required by lenders or investors to assess risk in providing an individual or business a loan. Scholarships and financial aid applications can also require net worth statements to assess eligibility. For the deceased, net worth statements can be used to assess value of their estate when in probate.
You can read more on net worth statements here .
Get Help With a Statement of Net Worth
Do you have any questions about statement of net worth and want to speak to an expert? Post a project today on ContractsCounsel and receive bids from estate planning lawyers and probate lawyers who specialize in statement of net worth.
ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.
Meet some of our Statement of Net Worth Lawyers
Samuel R.
My career interests are to practice Transactional Corporate Law, including Business Start Up, as well as Real Estate Law, Estate Planning Law, and Intellectual Property Law. I am currently licensed in Arizona, Pennsylvania and Utah, after having moved to Phoenix from Philadelphia in September 2019. I currently serve as General Counsel for a bioengineering company. I handle everything from their Business Transactional Agreements, Private Placement Memorandums, and Corporate Structures to Intellectual Property Assignments, to Employment Law and Beach of Contract settlements. Responsibilities include writing and executing agreements, drafting court pleadings, court appearances, mergers and acquisitions, transactional documents, managing expert specialized legal counsel, legal research and anticipating unique legal issues that could impact the Company. Conducted an acquisition of an entire line of intellectual property from a competitor. In regards to other clients, I am primarily focused on transactional law for clients in a variety of industries including, but not limited to, real estate investment, property management, and e-commerce. Work is primarily centered around entity formation and corporate structure, corporate governance agreements, PPMs, opportunity zone tax incentives, and all kinds of business to business agreements. I have also recently gained experience with Estate Planning law, drafting numerous Estate Planning documents for people such as Wills, Powers of Attorney, Healthcare Directives, and Trusts. I was selected to the Super Lawyers Southwest Rising Stars list for 2024 - 2026. Each year no more than 2.5% of the attorneys in Arizona and New Mexico are selected to the Rising Stars. I am looking to further gain legal experience in these fields of law as well as expand my legal experience assisting business start ups, and also trademark registration and licensing.
"Everything went very quick, I am very satisfied with the results."
Keidi C.
Keidi S. Carrington brings a wealth of legal knowledge and business experience in the financial services area with a particular focus on investment management. She is a former securities examiner at the United States Securities & Exchange Commission (SEC) and Associate Counsel at State Street Bank & Trust and has consulted for various investment houses and private investment entities. Her work has included developing a mutual fund that invested in equity securities of listed real estate investment trusts (REITs) and other listed real estate companies; establishing private equity and hedge funds that help clients raise capital by preparing offering materials, negotiating with prospective investors, preparing partnership and LLC operating agreements and advising on and documenting management arrangements; advising on the establishment of Initial Coin Offerings (ICOs/Token Offerings) and counseling SEC registered and state investment advisers regarding organizational structure and compliance. Ms. Carrington is a graduate of Johns Hopkins University with a B.A. in International Relations. She earned her Juris Doctorate from New England Law | Boston and her LL.M. in Banking and Financial Law from Boston University School of Law. She is admitted to practice in Massachusetts and New York. Currently, her practice focuses on assisting investors, start-ups, small and mid-size businesses with their legal needs in the areas of corporate and securities law.
"Keidi was excellent; quick turnaround even during the Holidays. Thank you."
Jane C.
Skilled in the details of complex corporate transactions, I have 15 years experience working with entrepreneurs and businesses to plan and grow for the future. Clients trust me because of the practical guided advice I provide. No deal is too small or complex for me to handle.
"Jane was great! Concise, efficient and on point with all the issues in our domestic partnership agreement. She understands the law and complexities of contracts and relationships. She was a tremendous help. I would definitely consult with her again!"
Vicki P.
Vicki graduated from Regent University School of Law in Virginia Beach, Virginia in 1996. She is a licensed attorney. She has been admitted to Wisconsin since 1998 and Pennsylvania since 1999.
"Perfect review of my loan agreement. Provided great info so I could make an informed decision."
Mark M.
I have 20-plus years of experience as a corporate general counsel, for public and private corporations, domestic and international. I have acted as corporate secretary for a publicly-held corporation and have substantial experience in corporate finance, M&A, corporate governance, incorporations, corporate maintenance, complex transactions, corporate termination and restructuring, as well as numerous aspects of regulatory and financial due diligence. In my various corporate roles, I have routinely drafted complex corporate contracts and deal-related documents such as stock purchase agreements, option and warrant agreements, MSAs, SOWs, term sheets, joint venture agreements, tender agreements purchase and sale agreements, technology licensing agreements, vendor agreements, service agreements, IP and technology security agreements, NDAs, etc. and have managed from both a legal and business perspective many projects in the financial, technology, energy and venture capital fields.
August 9, 2023
Daniel K.
My practice focuses on business and commercial litigation. I have worked with companies of all sizes from sole member LLCs to those in the Fortune 500. I've advised clients on mergers, equity issuances, commercial transactions, joint ventures, employment issues, and non-competition. I've also drafted and negotiated the underlying agreements for these transactions and more.
July 2, 2023
Thomas B.
Accomplished Attorney with 33 years of experience assisting clients with their legal needs, including reviewing and drafting of various contracts and agreements.
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Doc Type: Statement of net worth
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