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Why Are Liquid Assets Important for Illinois Estate Planning?

Posted on in Estate Planning Blog

Lombard estate planning lawyerWhen considering estate planning, it is wise to have some of your assets set aside as liquid assets. Liquid assets are easily turned into cash, the most obvious form being a checking or savings account. Mutual funds, stocks, and money market assets are also considered to be liquid. Non-liquid assets include physical property, which can take months to sell, or ownership in a company.

Immediate Access to Liquid Funds After Your Death

There are specific expenses that will come up very quickly after your death and your survivors may or may not be prepared to pay for these costs without using the funds from your estate. These costs may include:

  • Funeral and Burial Costs - According to Lincoln Heritage Funeral Advantage, the average funeral costs between $7,000 and $12,000. Even a cremation can cost $6,000 to $7,000. 

  • Taxes - Aside from the final individual income taxes that will be due on April 15 after a person dies, there will be federal and state estate taxes to pay as well. The Internal Revenue Service (IRS) can cease the distribution of assets during an audit. If there is a gross misrepresentation of income in a return, the IRS can audit a return up to six years later. If there is evidence of fraud or of trying to evade taxes, the IRS can conduct an audit at any time, even decades later. It is crucial to ensure that your loved ones have enough liquid assets to cover your income taxes for the tax year in which you pass.

  • Debts - This can include mortgage payments, car loans, student loans, credit card debt, and more. There are certain assets creditors cannot go after, such as life insurance, living trusts, and certain retirement accounts. Debts, like taxes, must be paid before distribution of assets can be made. 

Liquid Assets Protect Your Estate Both Before and After Death

Liquid assets allow your family to pay for the funeral, taxes, and debts without having to sell off items that you wanted them to inherit, such as property, jewelry, artwork, or collectibles. Not only does it keep your estate safe after your death, but there are often unexpected expenses as we age such as medical bills, nursing care, or expensive medications. Having liquid assets will provide you with the flexibility to properly provide for you and your spouse up until death. 

Contact a Lombard, IL Estate Planning Lawyer 

How much liquidity you need in your estate will depend on the value of your estate and the debts you have. An experienced Arlington Heights estate planning attorney can help you determine how to allocate your estate so that you have enough liquid assets for your spouse or family to cover those immediate expenses. Contact the law offices of A. Traub & Associates today at 630-426-0196 to learn more and schedule your private consultation.

 

Sources:

https://www.lhlic.com/consumer-resources/average-funeral-cost/

https://www.houstonchronicle.com/business/lipman/article/IRS-audit-rights-can-hold-up-distribution-of-15067523.php

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