Liquidity and Your Estate

One important goal of estate planning is the proper preparation to help minimize the financial burden and emotional stress on your family and loved ones who may be responsible for and reliant upon the administration of your estate. Building liquidity into your estate plan can help to ensure that resources will be available to cover estate settlement costs, as well as any tax due.

Liquidity refers to the ability to quickly and easily convert assets into cash without incurring a significant loss. Funds in a checking account are considered liquid assets, while real estate would be considered relatively illiquid. If your estate must sell illiquid assets to meet immediate cash needs, it may be forced to do so at a significant loss. In addition to the financial consequences, such forced sales are often difficult for heirs, particularly if it means the loss of a family business, heirloom, or home.

Anticipating and planning for the following expenses can help ease the estate settlement process:

  • Final medical expenses
  • Funeral costs
  • Outstanding bills
  • Existing debts
  • Income taxes ( and any accounting fees)
  • Appraisal fees
  • Federal and state estate taxes
  • Attorney fees

Be sure to consult an estate planning team comprised of an attorney, tax advisor, and financial professional to help you develop the appropriate strategies for your situation.


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