When a person dies, his estate and surviving family have to make a great number of large cash payments. For example, there will be funeral expenses, expenses of administration for the estate, taxes, and debts. Some of these payments may be delayed for some time, while others, such as the funeral expenses, must be paid fairly quickly. This increased need for cash or liquid assets also comes at a time when family income may have been severely reduced by the decedent's death.

This module discusses the many ways that such liquidity needs may be planned for prior to death. It also discusses actions that can be taken after death to maximize an estate's liquidity. While life insurance is the most obvious solution to the liquidity problem, it is far from being the only one. Much of the material in this module will refer to aspects of the federal income tax and the three federal transfer taxes: the gift tax, the estate tax, and the generation-skipping transfer tax. The material will give only abbreviated explanations of the tax concepts; it is therefore helpful if you have a basic knowledge of these federal taxes.

About the Author

David Mannaioni, CFP®, MPASSM is a professor at the College for Financial Planning. Utilizing his 30+ years of experience in the financial services industry, David also maintains a financial planning practice where he works with his clients in all areas of financial planning. In addition to his certifications, David holds life and health insurance licenses in several states, as well as the Series 6, Series 7, and Series 63 registrations with FINRA. You can contact David at david.mannaioni@cffp.edu.

Complexity Level: Advanced