Illiquid asset concentration worksheet

What the calculator shows

The worksheet takes six categories of assets and sorts them into two groups. Business interests, real estate and private funds fall into the illiquid group, while public securities, cash and retirement accounts fall outside it. The result is a single share showing how much of gross assets sits in the first group.

Illiquid here means an asset that cannot be turned into cash quickly at a fair price. A share of a closely held company has no daily market, a building takes time to sell, and a private fund often limits when investors can withdraw. Public securities and cash can usually change hands within days, which is why they sit on the other side of the line.

Estate planning education pays attention to this share because many obligations that follow a death are settled in cash. Settlement costs, debts and any transfer taxes are generally paid in money, not in ownership stakes. The share shown by the worksheet gives an owner a first picture of how much wealth is held in forms with no quick market.

How the arithmetic works

The formula works in three steps. First, add the operating business interests, the real estate and the private funds and partnerships to get illiquid assets. Second, add all six categories together to get total assets, which are gross, meaning before any debts are subtracted. Third, divide illiquid assets by total assets to get the illiquid share.

Gross means the full value of each asset is counted even when a loan is secured by it. A building with a mortgage still enters at its full value, and the mortgage does not reduce the figure. Debts are left out on purpose so that the share describes what is held, not what is left after obligations.

The result is a fraction between zero and one, which is often written as a percentage. A household with no business interests, real estate or private funds would show zero, and a household holding only those three categories would show the whole total. Every other mix falls somewhere between these two ends.

Assumptions and limits

Retirement accounts count as liquid here, although income tax may apply to withdrawals.

The worksheet applies no threshold and attaches no label to any percentage.

How to read the result

A low illiquid share means most of the gross total sits in assets that can be sold or drawn on quickly. A high share means most of it sits in holdings that have no ready market. Neither result is good or bad by itself, since the share describes a mix and not a verdict.

The share reads differently depending on the owner's situation. An owner who runs a company and also owns the building it occupies may find the share is high because two categories point at the same enterprise. Someone holding rental property across several markets may see a high share that is spread across many separate buildings.

Retirement accounts and public securities count as outside the illiquid group, yet they carry their own features. Retirement accounts can carry income tax when money comes out, and public securities move in price every trading day. The worksheet does not adjust for either point, so the share is a rough map and not a forecast.

Where owners get surprised

Owners are often surprised by how large business interests loom in the total. A company built over decades can be worth more than everything else combined, yet none of that value is sitting in an account. The worksheet puts a number on that gap.

Another surprise comes from valuation. Private interests do not have a quoted price, so the figure entered is an estimate, and different estimates can move the share a lot. A small change in how a company or a building is valued can shift the result by a wide margin.

Timing creates a third surprise. Estate obligations come due on a schedule set by law, while a business sale or a building sale follows the market's schedule. Where the two schedules diverge, the owner's family may hold plenty of value yet little cash.

Common questions