When creating a portfolio of your personal wealth, identifying your personal assets is a pivotal step in this important process.
To better understand the implications and definitions of what is considered a personal asset, we’ve reached out to three money experts who shared what you need to know as you build your wealth and create a long-term plan to preserve it.
What Is Considered a Personal Asset?
Personal assets refer to the resources and belongings an individual owns.
“These assets are generally acquired for personal use, enjoyment or investment purposes rather than for conducting business activities,” Sindy Canizales Walters, a managing director and financial advisor at Northwestern Mutual, said in an email.
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Personal assets can include various types of possessions and financial holdings. “The value of personal assets can fluctuate over time due to factors such as market conditions, depreciation, or appreciation,” she said.
“These assets are typically managed and utilized for personal purposes, such as housing, transportation, lifestyle, and personal financial goals,” she added.
What Are Typical Personal Assets?
As noted, personal assets are used for your personal life and enjoyment. Here are six common personal assets:
1. Real estate: This includes primary residences, vacation homes, land and other properties that an individual owns.
2. Vehicles: Personal vehicles, such as cars, motorcycles, boats or recreational vehicles.
3. Financial assets: These include cash, savings accounts, certificates of deposit (CDs), stocks, bonds, mutual funds, retirement accounts, cash value accumulating insurance policies and other investments held for personal financial growth.
4. Personal belongings: These generally encompass items such as furniture, electronics, jewelry, artwork, collectibles, clothing and other personal possessions.
5. Personal valuables: Assets like antiques, heirlooms, valuable collections (coins, stamps, etc.), and other high-value items.
6. Intellectual property: Intellectual property, such as patents, copyrights, trademarks, and royalties, can also be considered personal assets if they are individually owned and not associated with a business, Canizales Walters said.
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How to Determine the Value of Your Personal Assets
Determining the value of all your personal assets can be a difficult process, so here are eight steps to help you get started:
1. Create an inventory. Canizales Walters said to begin by creating a comprehensive inventory of all your personal assets mentioned above.
2. Research market values. Once you have your inventory, research the current market values of each asset, she said. You can do this by consulting online marketplaces, auction house records, price guides and professional appraisers.
3. Understand depreciation. Keep in mind that certain assets, such as electronics or vehicles, may have depreciated in value over time, so take depreciation into account when determining their current worth.
4, Consult professionals. For high-value assets or items requiring specialized knowledge, consider consulting professionals like appraisers, real estate agents or antique dealers. “They can provide expert opinions and help determine accurate values,” Canizales Walters said.
5. Document supporting evidence. Take photographs or videos of your assets, especially valuable items. Canizales Walters said to hold on to receipts, appraisals and any other relevant documents as evidence of value.
6. Consider replacement cost. When determining the value of assets for insurance purposes, consider the cost to replace the item with a similar one in the current market.
7. Update your inventory. Be sure to update the inventory of your personal assets especially if there are significant changes to your net worth or possessions — and embrace technology.
“I would avoid paper lists, they are harder to change over time,” Kristopher Carroll, a managing director at Wealth Enhancement Group, said in an email. Instead, consider apps like Nest Egg or Itemtopia to streamline the process, he said. “Or you may just use a spreadsheet,” he said.
8. Understand the importance of the process. Carroll said the primary reason to have an updated and thorough list of personal assets is for insurance purposes.
“If you are robbed or suffer a tragedy, the insurance company will want a list of what was lost,” he said. “You may also want it for estate purposes, particularly if you have some valuables you want passed to a specific heir. It also just helps if your family knows — in case of death, disability or mental impairment — what valuables you have and where they are.”
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The Difference Between a Personal and a Business Asset if You’re Self-Employed
While a business asset is specifically owned and titled to an LLC or corporation, a personal asset is held in an individual’s name or maybe the name of a trust, Andrew J. Evans, CEO and founder of Rossby Wealth and Rossby Financial, said in an email.
“The difference between personal assets and business assets, especially when you’re self-employed, revolves around ownership, use, and the purpose for which the assets are intended,” Evans said. “Understanding this distinction is crucial for financial management, tax purposes, and legal protection.”
He also explained that for self-employed individuals, distinguishing between personal and business assets is about protecting personal assets, ensuring accurate tax reporting and potentially benefiting from tax deductions associated with business assets.
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What Is A Personal Asset? originally appeared on usnews.com
