Having sufficient liquidity in an estate refers to the level of cash available to cover the administration costs, such as the fees for the executor and the Master of the High Court, as well as any outstanding liabilities from debts raised by the deceased. Individuals often mistakenly think that liquidity and solvency are the same thing.
Solvency is where the total assets in your estate exceed the total liabilities. Insolvency, therefore, is where - after the sale of every last asset - there is still not enough money to settle the liabilities in your estate. This also means that there will be nothing left for your heirs to inherit.
Liquidity, on the other hand, refers to whether an estate has sufficient cash - or assets which can easily be reduced to cash - to settle the liabilities and immediate costs, without the need to sell assets that would otherwise be left as an inheritance for beneficiaries.
Therefore, it is not enough simply to have a solvent estate. An estate with a cash shortfall lacks liquidity and can cause unforeseen negative complications in the administration and winding up of an estate.