Paying Estate Taxes on an Illiquid Estate

Lisa M. Rico (attorney, Wellelsey Hills, MA) recently published her article entitled Borrowing for Postmortem Liquidity, Part 1, 24 Prob. & Prop. 50 (Nov./Dec. 2010). The conclusion is below:

A number of methods are available to an illiquid estate to borrow funds to pay its estate tax and administration expenses, including IRC § 6166, which will be discussed in detail in Part 2 of this article. Before making a decision about which method should be used by the estate, the estate’s executor should analyze each option available, because each option can have different tax or business consequences. For example, in certain instances a commercial loan may not be available because a lender and the estate cannot agree on terms for the loan. On the other hand, a Graegin-type loan may not make economic sense, particularly in a case in which the loan is from a closely held business, a portion of which is owned by unrelated parties.