Estate Liquidity Need
Free Estate Liquidity Need calculator with clear step-by-step results.
About Estate Liquidity Need
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.
Formulas
Cash required
Cash = taxable estate x tax rate + gross estate x settlement cost + debts
Shortfall
Shortfall = cash required - gross estate x (1 - illiquid share)
Worked example
With the default values below, Estate Liquidity Need returns Liquidity shortfall to cover of $0.00. Change any input above and every figure here is recalculated in your browser.
Inputs used
- Gross estate valueminimum 0 $
- 1,400,000 $
- Share held in illiquid assetsaccepts 0–100 %
- 70 %
- Estate or inheritance tax rateaccepts 0–60 %
- 20 %
- Tax-free thresholdminimum 0 $
- 500,000 $
- Debts, funeral and final expensesminimum 0 $
- 45,000 $
- Probate and administration costsaccepts 0–15 %
- 3 %
Results
- Liquidity shortfall to cover
- $0.00
- Total cash the estate must produce
- $258,000.00
- Estimated estate tax
- $171,000.00
- Liquid assets available
- $420,000.00
Step by step
- 1Values used
- 2Cash required
- 3Shortfall
- 4Liquidity shortfall to cover= $0.00
- 5Total cash the estate must produce= $258,000.00
- 6Estimated estate tax= $171,000.00
- 7Liquid assets available= $420,000.00
Assumptions and limits
- The result is derived only from the 6 inputs listed above. Anything not among them is not part of the calculation.
- In particular, this calculator does not take inflation or compounding frequency into account.
- Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
- 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.
How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.
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.
Frequently Asked Questions
Why not just sell the assets?
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.
How is a shortfall usually funded?
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.