Don’t Forget These Assets When Making Your Estate Plan in Kansas
One mistake that people often make when they create an estate plan is to carefully plan for the disposition of some of their assets while making little to no mention of others. Bank accounts, mutual funds, and other financial assets often take center stage in estate planning while leaving other assets vulnerable to the possibility of disposition in a way that is not what the person planning the estate intends.
Financial assets are liquid; they can easily be converted to cash. It is important to include them in your estate plan, but don’t stop there. Other types of assets, like real estate, rights to natural resources like timber or oil, and collectibles, are not always easy to convert to cash quickly. These are illiquid assets, and they must receive careful treatment in your estate plan so they can be distributed according to your wishes.
For example, real estate markets fluctuate often, and some types of real estate are much harder to sell than others. Also, your plan for the real estate in your estate may involve transferring ownership of it to one or more heirs instead of selling it. Unless the estate plan that contains a piece of property also includes provisions for financing any necessary maintenance and payment of property taxes while the estate is being settled, the real estate may have to be sold quickly to settle the estate. When the need to sell an asset that’s not easy to sell is urgent, the price that the seller will have to accept to sell the asset within the required time frame is often a fraction of its value.
The same principle holds for collectibles, natural resource rights, and other illiquid assets. If an estate plan does not contain a careful plan for the maintenance and transfer of each asset, there is a risk that the asset will have to be sold to settle the estate. That result is often the exact opposite of what the decedent wanted to accomplish when they made their estate plan.
Fortunately, there are ways to plan for illiquid assets in your estate plan. You can anticipate the maintenance costs and estate or transfer taxes for the assets in your estate. When you have calculated those costs, you can plan for the cash to be available to your estate to pay them. With the maintenance costs and taxes paid, the assets will pass to your heirs instead of being sold.
Trusts and life insurance policies are two estate planning tools you can use to protect your illiquid assets. Your Kansas estate planning attorney can help you decide whether one or both of those tools will work best for your estate. If you would like to begin making a comprehensive estate plan, or update or revise your existing estate plan, arrange a consultation with the law office of J. Joseph Weber, P.A., by calling us. You can also reach us online. Our office in Wichita is open on weekdays, from 8 a.m. to 5 p.m.