What options are available for the payment of a federal estate tax liability?

There are a limited number of alternatives available to pay federal estate tax liability. The Internal Revenue Code requires that the federal estate tax due be paid by cash or check. In a nutshell, here are the options: Cash on hand Liquidation of the decedent's assets to generate cash Bank loan (if qualified) Loan from a family member or friend Installment payments over 14 years (if the estate qualifies) Life insurance proceeds to generate cash Other financial vehicles that will generate cash or liquid assets Under certain circumstances, the IRS will allow an estate some latitude in paying federal estate taxes based on hardship. This test is difficult to meet, and no one should rely on it for the payment of federal estate tax. In the final analysis, it is better to plan how federal estate taxes are going to be paid rather than leaving that burden to loved ones.