Creating a comprehensive estate plan requires you to contemplate numerous issues and consider multiple goals and objectives. For most people, the primary concern of their estate plan is how best to provide for loved ones in the event of their death or incapacity. Clearly, the more assets you leave behind the better your loved ones will be provided for in your estate plan; however, if your estate plan lacks liquidity your loved ones may be in trouble regardless of the value of your estate.
To understand the need for estate liquidity you must understand what is meant by the word “liquidity”. Liquidity refers to an asset’s immediate cash value. By way of illustration, imagine that you receive a phone call in the middle of the night informing you that a loved one was involved in a catastrophic car accident and may only have hours to live. You need to purchase an $800 plane ticket and don’t have any way to do so. You call three friends. One friend offers you an ounce of gold valued at about $1,200, the other friend offers you stocks valued at $2,500 and the third friend offers you $1,000 in cash. If you need to be on the next plane leaving, which asset is more valuable to you? The cash is because it is the most liquid asset of the three. The other assets require you to exchange them into cash for you to benefit from their value.
On a much larger scale, the same thing could happen when you die. If you have a family or loved ones who depend on you financially you need to do more than simply gift assets to them in your estate plan. You need to make sure those assets have sufficient liquidity to protect and provide for your beneficiaries immediately following your death.
Quad Cities Estate Planning
Because your estate will likely be required to go through probate following your death, estate assets may be tied up for months, even years, making them unavailable to beneficiaries. A $500,000 stock portfolio doesn’t do your spouse any good if he or she cannot access the stocks. The good news is that by working closely with your estate planning attorney in Quad Cities you can ensure that your estate plan provides sufficient liquidity to provide for your loved ones immediately after your death. Including non-probate assets, such as life insurance and/or a trust in your plan can provide the liquidity you need.
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