The Liquidity Problem
When a person dies, taxes and other costs must be paid in cash within a short period following the date of death. If arrangements haven’t been made to anticipate them, these expenses can severely deplete an estate intended to remain intact for the heirs.
Expenses cropping up as a result of an estate owner’s death can add up to a disturbingly long list:
- federal and state estate taxes
- funeral expenses
- unpaid medical expenses
- debts of the decedent
- executor’s fees
- attorney’s fees
- court costs
- appraiser’s fees
- costs of insuring and otherwise protecting estate property If the estate is short of cash, the executor may be forced to sell estate assets—often at sacrifice prices—resulting in a dramatic reduction in the wealth that was intended for the deceased’s heirs.