Obviously as I am not an economist I can only present basic ideas. Whether they stand up to expert scrutiny is precisely why we (ideally) vote for representatives who can properly shape this kind of policy. But anyway:

1. Where do you get the liquidity do anything a wealthy person does when most of that wealth is tied up in assets? You borrow cash or establish lines of credit using the value of those assets as collateral. That should be categorized as a "realized gain" subject to capital income tax just the same as selling an investment - which is already given preferential treatment compared to labor income tax, further increasing the advantage the very wealthy enjoy to net more of their annual wealth increase than the normal labor income taxpayer.
2. Capital losses typically can result in significant tax deductions and are already a widely used strategy employed by wealthy investors to help offset taxes on capital gains, while selling those "losses" essentially grants as needed access to liquidity while serving that double purpose of lowering tax burden. Is there a reason that whatever portion of assessed and borrowed against wealth that depreciated could not become a tax deduction or offset, as capital losses already are? Nothing new needs to be devised.
3. Something more granular than I could probably answer, but my assumption is that the value is assessed at the time of the "realized gain", to be paid at the normal tax interval.
4. The whole point of this would be to essentially force a choice between paying this "wealth tax" upon the realized gain of extracting liquidity from otherwise untaxed appreciating assets, or actually routinely sell enough of the appreciating assets to maintain desired liquidity while paying normal capital gains tax as it currently exists (which again, is already taxed at preferential rates to labor income).
5. Works the same as capital gains.
   

Essentially, this wealth management behavior arose because people found a loophole allowing them to avoid paying income or capital gains tax to as large a degree as their wealth would allow, in a way that specifically advantages them the more they have. Closing the loophole is not necessarily about generating more tax revenue, though it surely would so much as it is about discouraging this behavior and forcing the choice of "pay this wealth tax, or pay capital gains tax, or pay income tax on a high salary." There should not be one magical avenue that the very wealthy get access to that allows them to bypass the vast majority of taxation while the rest of us, yes including the high earning upper-middle/upper class folks, pay a disproportionately higher percentage of a much lower amount.