Your estate may include valuable property without having much cash available. Real estate or your share of a private business could make up a large part of your wealth. Since these assets often take time to sell, your estate may have trouble covering expenses after your death.
You can plan for this by comparing the cash your estate could access with the costs it may have to pay. This can help you see whether your personal representative might have to sell property that you hoped to leave to a beneficiary.
Why a lack of cash may matter
An illiquid asset is property that usually takes time to sell at a fair price. Real estate and shares in a private business often fall into this group.
After your death, your estate may owe debts, taxes and costs of settling the estate. Maryland law sets an order for paying estate claims if the estate cannot pay every claim in full.
Maryland also generally requires an estate tax return when the federal gross estate, with certain additions, reaches $5 million. If your estate has too little cash to cover its expenses, your personal representative may have to find funds elsewhere. A sale of valuable property may become one option.
Comparing cash with likely expenses
You may want to identify which assets could provide cash without requiring the sale of major property. Bank accounts and investments that sell quickly may provide funds for estate expenses.
You can then compare those assets with expected debts, taxes and costs of settling the estate. If the numbers do not line up, you can see which major assets the estate might have to use to cover the shortage.
Property values and account balances also change over time. An occasional review can keep your estimates based on your current assets.
Keeping useful estate records
Consider keeping a list of your major assets, what they are worth and how easily your estate could turn them into cash. You may also want to note any debts and expected estate costs. Reviewing this information together can help you spot a possible cash shortage and explore ways to address it as you plan your estate.
