Free Educational Tool

If your estate owes tax, will it have the cash to pay?

Federal estate tax is due in cash, generally within nine months of death. The problem is rarely the tax itself — it's where the money comes from. When most of an estate is tied up in a business or real estate, the tax can force a hurried sale of the very assets the family wanted to keep. This tool estimates the tax and, more usefully, the liquidity shortfall — the gap between what's owed and what can actually be paid without selling something. That gap is the number life insurance is built to fill. It's an estimate for planning conversations, not tax advice.

Part of our guide: Estate planning for illiquid estates →

The tax is one number; the liquidity is the real problem

An estate above the federal exemption is taxed at a top rate of 40% on the amount over the line. Whether that's a crisis depends entirely on what the estate is made of: a portfolio of marketable securities can pay its own tax; a family business or a building cannot, without being sold.

Why liquidity, not the tax rate, is what to plan around

The estate tax is a cash obligation with a hard deadline. If the liquid assets on hand don't cover it, the estate has to raise cash — and when the bulk of the estate is a closely-held business or property, that can mean a forced or fire-sale, often at a discount and often against the family's wishes. Life insurance solves this cleanly because it delivers tax-free cash to the right hands at exactly the moment the bill is due — and when it's owned outside the estate (typically in an irrevocable life insurance trust, or ILIT), the death benefit itself isn't added to the taxable estate.

This tool separates your assets into liquid and illiquid precisely so it can show that gap. A few things it deliberately keeps simple: it applies a flat 40% to the amount over the exemption (close to accurate at these levels), it doesn't model state estate tax (Florida imposes none — this is a federal estimate), and it doesn't attempt installment relief like §6166 or lifetime gifting strategies. Those, and the exemption's exact current figure, are your attorney's and CPA's work. This is a planning-conversation estimate of the coverage gap, nothing more.

Estimate the gap

The estate and its liquidity

All estimates. Nothing is sent anywhere — this runs entirely in your browser.

The exemption

The federal estate-tax exemption is the amount that passes free of tax. It changes with legislation and is indexed — the figure below is the 2026 per-person amount; confirm the current number with your CPA. A married couple can generally shelter twice this through portability, and the planning concern is usually the second death, when the combined estate is measured against the doubled amount.

Whose estate are we measuring? Drives whether one or two exemptions apply

Federal exemption, per person 2026 amount shown — editable; confirm the current figure

The estate

Split the estate by how easily each part could be turned into cash to pay a tax bill. Include life insurance the person owns personally in the liquid column — it's part of the taxable estate. Insurance owned by an ILIT goes in the last field instead.

Illiquid assets Business interest, real estate, land — hard to sell to pay tax

Liquid assets Cash, marketable securities, retirement accounts, personally-owned life insurance

Life insurance already set up for liquidity Owned outside the estate (e.g. an ILIT) — pays tax without being taxed

Estimated liquidity shortfall

Enter the estate figures above to estimate the gap.

Enter figures to see the breakdown

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This is an educational estimate, not a valuation, quote, recommendation, legal advice, or tax advice. It applies a flat 40% federal rate to the amount above the exemption you enter, doubles the exemption for a married couple to approximate portability, and estimates only a federal figure — it does not model state estate tax (Florida imposes none), the unlimited marital deduction at the first death, lifetime gifting, valuation discounts, §6166 installment relief, or the many facts that determine an actual estate-tax liability. The exemption amount changes with law and is your CPA's to confirm. Whether tax is owed, and how to plan for it, is work for your attorney and CPA; the coverage that fills a liquidity gap is where we help. No information entered is collected or transmitted.

Discuss a liquidity plan with an agent

Where this fits

Filling the gap is coordinated work

A shortfall estimate is a reason to plan, not a conclusion. Closing it well takes three parties.

Attorney, CPA, and funding — and why the ownership matters

Your attorney handles the structure — the will and trusts, and whether an ILIT should own the coverage so the death benefit stays outside the taxable estate. Your CPA confirms the estate's value, the current exemption, and the tax picture. The funding — sizing the coverage to the shortfall and getting it owned correctly — is our seat. Owned the wrong way, life insurance meant to solve a liquidity problem gets added to the estate and makes it slightly worse; owned in an ILIT, it does exactly its job.

If the illiquid asset driving the shortfall is a business, two neighboring questions usually surface with it: whether the buy-sell that governs that business is funded and defensibly priced — see the buy-sell funding calculator — and, after the 2024 Connelly decision, whether a company-owned policy is quietly inflating the estate in the first place, which the Connelly review covers.

Most of your estate is the business — and the tax is due in cash?

That's the classic liquidity squeeze, and it's solvable well before it's a crisis. We size the coverage to the gap, coordinate the ownership with your attorney so it sits outside the estate, and hand the valuation and tax questions back to your CPA. Often the review ends in "you have enough" — which is a fine answer, in writing.

How the second opinion works