When doing estate planning, it is important not only to consult an experienced attorney, but also a financial planner. As essential as an attorney is to the estate planning process, they will not necessarily have the same focus as a financial planner. One of the ways a financial planner can be very helpful to the estate planning process is to ensure that there is sufficient estate liquidity.
Ensuring that there is sufficient liquidity in one’s estate to take care of the many expenses that can come up in the process is critical to the process. If the estate doesn’t have enough liquidity to take care of its expenses, heirs may be forced to convert illiquid assets, such as real property or motor vehicles, to help pay for the expenses.
The types of expenses that need to be accounted for in ensuring adequate estate liquidity are many, and include executor’s fees, funeral expenses, cash bequests, taxes, and other debts.
Estate planners often offer liquidity analysis services, which can assist in determining whether an estate has sufficient liquidity to manage the various expenses that may arise. Life insurance, in particular, is a popular way to create estate liquidity. Many financial planners will determine the financial viability of an insurer and provide a report to the client to enable them to determine whether they are in the best position to ensure the funding will be there.
Consulting a financial planner to determine estate liquidity is an invaluable way to ensure that problems don’t arise later on with difficulties in paying for expenses and satisfying any debts or liabilities.
Source: Moneyweb.com, “Liquidity key component in estate planning,” Jaryd Bryce-Borthwick, August 4, 2011.