How do I know if my estate will have enough liquidity when I die?

Liquidity is usually a problem when a majority of your assets cannot readily be converted to cash if needed to pay taxes or other expenses of administering your estate.  For example, real estate, retirement accounts, or a closely held business may either take time to liquidate, have adverse tax consequences upon liquidation, or the family may desire the asset not to be sold.  One way to increase liquidity is to purchase life insurance.  However, life insurance proceeds are included in your taxable estate if you own the policy at death, which defeats the purpose of the insurance in providing liquidity to cover taxes and costs.  For that reason, an estate planning attorney may recommend an Irrevocable Life Insurance Trust, which (if drafted and administered properly) will hold the life insurance outside of your taxable estate.

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Morris Hall, PLLC

At Morris Hall, we have focused our legal practice on estate planning for over 50 years.  Along with estate planning, our attorneys help clients and their families with matters of probate, trust administration, wills, powers of attorney, business planning, succession planning, legacy planning, charitable gifting, and other important legal aspects...Read More!

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