Planning for Liquidity

Liquidity is an important consideration in the estate planning process. Upon your death, your family will be met with many expenses, such as burial costs, debts, and taxes. Your estate should be arranged in a way such that there is adequate assets to liquidate to cover the expenses. Most people cover the immediate liquidity need by purchasing life insurance policies.

credit-squeeze-taxation-purse-tax-46242The key to understanding liquidity at time of death is the immediate nature of the expenses. For example, if the deceased is the sole provider for the family, then drawing down cash from a checking account for burial expenses may be possible, but it may leave the family with no cash for groceries and recurring bills and expenses.

Additionally, the estate should not rely on the liquidation of assets to meet expense needs. The forced sale of assets rarely meets the hopes of the family. For example, people go to estate sales and garage sales to get good deals on items that need to move. Fair market value is a foreign concept for the immediate liquidation of assets in an estate sale.

 

-BDR

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Brian Russ is an estate planning attorney in West Sacramento, Yolo County, California. Call today to schedule a free estate planning consult: (916) 750-5155.

Originally posted in January 2018.

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