Free Estate Liquidity Need calculator with clear step-by-step results.
An estate can be wealthy and still insolvent in cash terms. Tax, probate costs and debts fall due long before illiquid assets such as property or a private business can be sold, so this compares the cash required against the cash actually available and reports the gap that life insurance or a cash reserve has to fill.
Cash required
Cash = taxable estate x tax rate + gross estate x settlement cost + debts
Shortfall
Shortfall = cash required - gross estate x (1 - illiquid share)
Estate and inheritance tax rules, thresholds, reliefs and exemptions vary enormously by jurisdiction and change frequently. This is an illustration only - obtain advice from a qualified estate planning professional.
Forced sales inside a probate deadline routinely realise well below market value, and a family business or farm may not be saleable at all without destroying its value.
Commonly with life insurance written into trust so the proceeds fall outside the estate, or with a deliberately held cash reserve. Both need to be arranged in advance.