The definition of liquidation in financial terms is the conversion of assets, like stocks, properties, and bonds, into hard cash that can be used directly in any transaction. These assets, along with cash, are called an estate. Some people may liquidate assets to be able to fund certain purchases, like mortgages and college tuition. While some investments and loans allow the investment of assets instead of cash, liquidation gives a person more financial options to pursue different applications. Since liquidation can be quite broad in its utilization strategies, we’ll be more focused on estate liquidation after death, as it’s the most common.
Reasons for Estate Liquidation Post-Death
When someone in the family dies, liquidation is done to ensure the complete dispersal of assets that this person owns. There are two main categories of assets; actual property, such as real estate; personal property, that can range from musical instruments to cars and stocks. Tangible personal property is often the reason for the liquidation of assets to legally authorize its usage by the designated people. The lack of a will makes estate liquidation a must, and it’s often accompanied by legal counsel to help the family understand how the law dictates the beneficiaries.
Whether the asset is a real estate property or a piece of jewelry, they can’t often be transferred to the legal beneficiaries without liquidation through sales or auctions. Estate sales aren’t the same as liquidation because liquidation has a much broader range of assets, which usually involves legal professionals like lawyers and appraisers.
Initial Steps to Take After Death
Once a family member dies, the priority will be trying to find a will or a trust that directly refers to the appointed executor or trustee of the will. Making sure to also obtain more than one death certificate because they’ll be used in many legal proceedings regarding estate liquidation. A common mistake people make is forgetting to contact creditors of the deceased to ensure that any interest and activities on the deceased’s account get frozen. While the creditors won’t remove the debt of the deceased, you shouldn’t use your own money to pay the debt.
The procedure of paying debt can change once creditors are notified of the death by placing a note on the debt file, giving the beneficiary some leeway. In some cases, the estate may be insolvent or non-existent, which would make the creditors unable to enforce any debt obligations; debts can end up written off the file.
Processing an Estate Sale
Estate sales are not as easy as many may think, especially if the assets being sold are of high value. These sales will require time-consuming activities, according to clearlyquick.com, professional estate liquidators will reduce the confusion and help make the process flow more efficiently, especially when it’s a tough time for the family, maximizing the value you can get for the liquidation in addition to the organizational manner they are performed in.
Using professional estate liquidators’ services should help you figure out how the procedure works, and whether it’s the only financial decision you can take regarding the estate. If the deceased didn’t have life insurance, selling the estate is a pretty good decision to take. Estate sales are often used because of their convenience and efficiency; it shouldn’t take more than a few days to finalize estate sale transactions if you’re using professional estate sale services.
It’s not up to an executor or a beneficiary to define the value of an asset all by themselves. Your own judgment may not be within the market range or appropriate, and sometimes even much lower than the actual value. Independent licensed appraisers are used to define the value of an asset, making it legally and officially viable. Executors acting on behalf of the state are neutral at all times, so as long as the appraiser is licensed, it’s accepted. Some people like to have more than one appraiser look at the asset to get the most accurate estimates.
Requirements of Execution
Whether you’re an executor or someone looking for one, you need to understand the fiduciary duties of managing an estate’s assets legally and efficiently. Executors shouldn’t sell any property to their clients, in addition to avoiding inappropriate appearance. Liquidation of assets will require a bank account for the cash to be transferred to. This bank account should be specifically created for the estate to deal with any transactions related to the estate from it. Some assets may not be sold based upon your sole decision, requiring the approval of the court to be able to sell it.
If the value of your assets, as a total, can cover debt repayment, it should be used to repay the debt. But sometimes the value of the estate may be inherent in assets like properties instead of cash. To solve this problem, a part of the assets, such as jewelry, art, or stocks, may be sold to repay the debt, leaving the rest to the beneficiaries. Selling assets to repay debt or distribute cash between multiple beneficiaries is a very important decision. If there is a will that dictates specifics like giving an asset to someone, it has to be followed before making any other decisions.
Auctioning the Estate
Auctioning is usually the first choice chosen to liquidate an estate when time is a critical element. Since auctions are done on specific days of your choosing, you’re guaranteed to sell most of the assets in the auction within that day. The main drawback of auctions is the reduced value of assets, compared to their market value. To generate higher cash value, the assets sold in the auction should be attractive enough to have bidders place bids of high value. The marketing of the estate will also help you set a proper base price in a controlled auction.
A person’s estate is the net worth of their assets collectively, whether they’re dead or still alive. Liquidating an estate doesn’t necessarily have to be after death, but it’s most common because the deceased either doesn’t have a will or left a lot of the assets undesignated to the rightful beneficiaries. We can only hope that we have provided you some valuable information that can help you deal with this process more seamlessly. Remember what you have learned here and try not to do everything yourself if things get a little too much, there are professionals out there who can assist you. What’s more important is that you allow yourself to grieve and cope with the loss of a loved one.