Forced  VS.  Planned Liquidation       

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Comparative Results of Forced vs

Planned Liquidation

FORCED

PLANNED

Many account receivables are almost impossible to collect.  May lose 70 to 80% of the pre-death value  if sold to a specialized financial institution that purchases accounts receivables.

Executor can afford to wait for orderly collection of most accounts receivables.  If necessary, executor has time to force legal action for collection.

Inventory, fixtures, and equipment will be sold at auction for a fraction of their value.

Executor in a better position to negotiate sale of inventory, fixtures, and equipment with potential buyers.  Especially important if assets are seasonal in nature or very specialized.

Any goodwill is totally gone - a significant loss for many small companies.

Cooperative venture with other businesses or individuals arranged prior to the death may facilitate transfer or sale of some goodwill value.

Immediate push by creditors for full and immediate payment of all claims against the business. May impair credit record of surviving family members.

Orderly and full payment of claims of creditors, but not until due. No injury to creditworthiness of surviving family members.

Sale of assets may satisfy creditors and IRS, and leave nothing for the family

The family will receive the income it needs, creditors will be paid, so will IRS.

 

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Copyright 2001 Kaplan Management & Insurance Services
Last modified: June 13, 2012