Since the estate tax does not affect an inheritance until it gets to $5.25 million, most people are not concerned with that when it comes to the liquid assets in their estate. Only millionaires and their heirs are affected by that particular issue.
On the other hand, there are numerous other reasons for people to worry about their estate’s liquidity. Among them are funeral costs that can range from $7,000 to $10,000 for an average funeral, including the casket and cost of embalming. Furthermore, medical expenses may become difficult to pay if Medicare doesn’t cover everything, such as long-term care. Probate costs, depending on the state, such as attorneys’ fees and court costs could be as much as thousands of dollars. Lastly, estate tax exemptions dropped as low as 675,000 for New Jersey.
The question is what is the solution for being ready for the necessity of covering such nebulous expenses? Liquidity, like stocks and bonds, as well as savings accounts or life insurance policies that are used creatively are a good start. Discussing these important matters with heirs is also recommended. It’s much healthier financially to have an uncomfortable discussion up-front as opposed to suffering a liquid asset deficit later.
Estate planning is an important part of life, and an estate plan can be straightforward or very complex. An estate planning attorney may be able to help residents of New Jersey utilize some estate planning vehicles such as health care directives, wills, trusts, a durable power of attorney or living trusts. Finding legal assistance in this area could be the best way of achieving true peace of mind and the opportunity to properly provide for loved ones.
Source: Life Health Pro, “Why you should keep an eye on estate liquidity“, Tom Nawrocki, July 11, 2013