income generation, transition into retirement
A balancing act between safety and growth. learn more.
Liquidity of Assets
Essential for Sound Estate Planning
Planning for estate liquidity, or the ability
of an estate to pay costs after death,
should be one of your most important
estate planning objectives.
Without it, your client's family
may be forced to sell assets at an
inopportune time to meet its obligations –
possibily resulting in an economic loss.
To protect against such happenings here are a few ideas:
Retain Cash
Counsel your clients to retain cash and distribute nonliquid instead of liquid assets to the beneficiaries in his/her will. For example, Morgan gets the house and ski lodge and Mathew gets the boat for example.
Borrow as required but sparingly
Practically speaking, to plan for their deaths adequately, your clients would have to stockpile cash to a level that does not make sense economically.
Bear in mind that probate laws generally prohibit an executor from obtaining a loan without incurring personal liability for the debt, unless your client's will specifically provides that the executor may do so.
Though not ideal, in cases where the timing of asset liquidation is extremely poor, borrowing can be considered a viable option.
Specify the sale of specific assets
If your client owns assets that no one else wants, a collection of antique bicycles or moustache clippers, for instance. The liquidation of these assets provides cash when it's needed. Be sure to tell your client to give their executor permission to make the sale.