Real Estate & Tax-Deferral Strategies / Cash Management
Cash Management Strategies
A plan for the cash, not just the investments
A property sale, business sale, inheritance, or 1031 exchange that doesn't come together can leave you with a large cash balance sitting in a checking account. Cash still needs a strategy: where it is held, how it is insured or backed, how it is taxed, and how quickly you can reach it. We help you build a short-term plan while you decide on the long-term one.
Key points
- Large balances in a single bank account may exceed FDIC insurance limits.
- Treasury bills, government money market funds, and brokered CDs each offer different combinations of yield, liquidity, and protection.
- Interest from Treasury securities is exempt from Indiana state income tax; other interest generally is not.
- Proceeds held by a qualified intermediary during a 1031 exchange follow separate rules. Taking possession of them can end the exchange.
Comparing common cash vehicles
| Protection | Liquidity | Tax treatment | |
|---|---|---|---|
| Bank deposits & CDs | FDIC insured up to applicable limits | CDs may carry early withdrawal penalties | Taxable federal & Indiana |
| Brokered CDs | FDIC insured up to limits per issuing bank | Can be sold before maturity at market price | Taxable federal & Indiana |
| U.S. Treasury bills | Backed by the full faith and credit of the U.S. government | Highly liquid; market value fluctuates | Federal tax; exempt from Indiana tax |
| Government money market funds | Not FDIC insured; seeks stable value | Generally daily liquidity | Federal tax; portion may be state-exempt |
Matching cash to when you'll need it
0 to 12 months
Tax reserves, planned purchases, emergency fund. Priority: liquidity and stability.
1 to 3 years
Known future needs. A ladder of Treasuries or CDs matched to dates.
3+ years
Long-term investment, phased in according to a written plan and your risk tolerance.
When cash management matters most
Right after closing on a property or business sale, while waiting on a 1031 replacement property, after an inheritance, or when a large CD matures. These are moments when decisions get made quickly, and a short-term plan gives you room to make the long-term ones carefully.
Frequently asked questions
Where should I keep money after selling a property or business?
It depends on when you'll need it and what comes next. Money earmarked for taxes, a planned purchase, or an emergency reserve is usually kept in highly liquid, low-volatility vehicles such as government money market funds, Treasury bills, or CDs laddered to match your timeline. Money intended for long-term investment may be phased in according to a written plan.
Can I lose money in a money market fund?
Money market funds aim to maintain a stable value and invest in short-term, high-quality securities, but they are not FDIC insured or guaranteed, and it is possible to lose money. Government money market funds invest primarily in U.S. government securities and repurchase agreements.
What happens to my cash during a 1031 exchange?
During a 1031 exchange, sale proceeds must be held by a qualified intermediary, not by you. If an exchange fails or you decide not to complete it, the proceeds are returned to you and the gain generally becomes taxable, which is when a cash management plan becomes especially important.
Should I set aside money for taxes after a sale?
Often, yes. Capital gains and depreciation recapture from a taxable sale can create a significant liability. Your CPA can estimate the amount and whether estimated tax payments are needed; we can help hold that reserve in short-term vehicles until it is due.
How is interest on Treasury bills taxed in Indiana?
Interest on U.S. Treasury securities is subject to federal income tax but exempt from state and local income taxes, including Indiana's. Interest from bank deposits, CDs, and most money market funds is generally taxable at both levels, though some government money market funds pass through a portion of income that may be state tax-exempt.
Planning to sell investment property in Northwest Indiana?
Start the conversation before you list. We'll review your situation, coordinate with your CPA, and help you compare your options. Serving Valparaiso, Chesterton, Crown Point, Munster, and the Greater Chicagoland area.
Important information
Money market fund shares are not insured or guaranteed by the FDIC or any other government agency, and although a fund may seek to preserve the value of your investment, it is possible to lose money. U.S. Treasury securities are backed by the full faith and credit of the U.S. government as to timely payment of principal and interest; their market value fluctuates if sold before maturity. Bank deposits and CDs are FDIC-insured up to applicable limits. Yields change and are not guaranteed.
This page is for general educational purposes only and is not a recommendation, an offer to sell, or a solicitation of an offer to buy any security. Patten Financial Group does not provide tax or legal advice; please consult your CPA, tax attorney, and a qualified intermediary regarding your specific situation. Patten Financial Group does not act as a qualified intermediary. All investing involves risk, including the possible loss of principal. Tax laws are subject to change.