» Why Pre-PLAN Your End-of-Life Arrangements?
» Why Pre-PAY Your Funeral Expenses In Advance?
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A Smart End-of-Life Plan Includes:
1. Preparing an Estate Plan in advance…
Your may have started your estate planning process by creating a Will or Trust. However, the sad truth is that approximately 70% of Americans die without even leaving a Will, also known as a Last Will and Testament, which is designed to detail their final plans and preferences. So what this means is that many families are left to deal with many emotional and financial pressures and uncertainties.
By creating a Will or Trust, you have clearly taken a step in the right direction. However, as you will see below, there are other equally, if not more important matters, which need to be addressed in advance.
2. Preparing your final arrangements in advance…
Similar to prearing your estate plan, another extremely important task is addressing your family’s immediate concerns at a time when they truly need this advanced planning the most. After losing a loved one, some of the most important needs are finding answers to questions such as:
What do we do now?
Who can we turn to?
What would you have wanted?
How will these expenses be paid?
Was your wish to be buried or cremated?
What is your preferred final resting place?
In addition, another challenging aspect of planning a funeral is the fact that those responsible for taking care of your final arrangements are forced into making difficult decisions in a timely manner, usually within a few days after your death.
The multiple benefits…
Most financial professionals are realizing that an integral part of a sound financial and estate plan is taking care of your funeral services ahead of time.Pre-planning a funeral gives you the ability to choose your method of disposition, the exact type of services you want, and allows your family to focus more on things such as grieving and recovery. In addition, pre-planning a funeral is also a good thing for you because it allows you to make extremely important decisions through a calm and clear thought process. Emotionally, it is much more likely that you will create a more rational and logical end-of-life plan.
Although your advanced planning may not fully alleviate the emotional and financial stresses your loved ones will face, this will certainly help them reduce or eliminate the large majority of stress and pressures, helping them ease the pain of a very difficult situation.
10 key considerations for creating your End-of-Life Plan:
- Visit various funeral homes and interview multiple funeral directors
- Search for a funeral home and location where you think your family would be most comfortable
- Consider bringing family members with you during this selection process
- Be aware and informed of bereavement entitlements such as veterans, unions, fraternities
- Consider religious and moral convictions, and discuss them with your family
- Determine your method of disposition (burial, cemetery, entombment, cremation)
- Plan your ceremony considering things like casket viewing, religious aspects, who should be included
- Itemize your costs
- The Federal Trade Commission (www.ftc.gov) offers a free funeral planning guide titled “Caskets and Burial Vaults” which has made it easier for consumers to comparison shop.
- The FTC created The Funeral Rule, which requires funeral directors to give pricing information over the phone, as well as provide you with a readily available General Price List if you visit them in person. This FTC Funeral Rule also allows you to purchase caskets, which are the single largest funeral expense, from outside vendors without the threat of a carrying charge. For more information about The FTC Funeral Rule, you can visit www.ftc.gov
Why Pay For Funeral Expenses In Advance?
Although pre-planning a funeral may help alleviate many of the details, prepaying (also known as prearranging) for your funeral services is a way of taking care of the actual expenses.
Prepaying your funeral or cremation is one of the fastest growing, and most appreciated and accepted aspects of funeral planning. Similar to preplanning your funeral, paying your funeral expenses in advance is also widely accepted by most financial professionals as a solid piece of a sound financial and estate plan.
When prepaying your funeral plan, the most common and widely used strategies are savings and life insurance, mainly because they tend to be deemed the most reliable and readily available. However, there are several other strategies to consider when prepaying your funeral costs or expenses:
Savings
Although many people choose to set aside savings to pay for funeral expenses, there are several reasons this does not always end up working out as originally planned. First, the savings can be depleted based on unexpected financial circumstances, such as health or financial issues. Second, these funds are not always readily available and liquid upon death due to the challenges and restrictions often found in estate planning. Third, the funds set aside can often be insufficient due to inflation and the rising cost of funeral expenses. Finally, it should be noted that savings are included in a part of one’s estate, and, thus, the taxable consequences can often come into play.
Life Insurance
Term Life Insurance is widely considered to be a flexible, simple, and affordable way to pay for your final funeral expenses. Although Term Life Insurance has a set term, or set number of years, it also has multiple uses in prepaying for your funeral. Because upon your death it becomes a liquid asset that is usually not part of your estate, it can be used for many things such as funeral, burial, cremation, liquidity, and many other things, including debts or obligations.
In addition, there are some types of life insurance that allow the funds contributed to these policies (either in lump sum, monthly, quarterly, semi-annually, or annually) to grow and accumulate as a cash value that can be accessed if necessary. Therefore, these policies can not only be used for funeral expenses, but also for other financial planning options that may arise such as financial emergencies, and college.
Funeral Insurance
Funeral insurance is an insurance policy which is specifically designed to cover any costs or expenses which are directly related to your funeral. If you purchase one of these policies, one of the options you have is to determine exactly which funeral costs or expenses are to be covered, such as flowers, burial plot, grave marker, and much more. Another option you have is for the policy to be paid out in a single lump-sum, which can be used to cover your pre-determined costs or expenses, or simply help your loved ones financially as they plan for you. There are many insurance companies that offer funeral insurance packages, and certain funeral homes or funeral companies also offer policies.
Pre-Need Trust Agreements
Another alternative to prepaying your funeral is to consider a Pre-Need Trust Agreement to pay for your costs or expenses. Generally speaking, these Trust accounts are typically funded with monthly payments that are invested in a fund which is designed to grow over time. Although a Trust account is designed to provide the potential for protection against inflation, it is not guaranteed to do so.
*Key Considerations, Qualifications, and Disclosures
Although the large majority of the funeral industry will tell you that most funeral costs can range anywhere from $5,000 – $10,000, it is very common for funerals to cost much more or maybe even less.
Also, as with any important financial decision or investment, there are many advantages and disadvantages to each of the options mentioned above. Before choosing a policy, it is important to consider many things, including but not limited to your age, health, financial status, objectives, liquid assets, tax issues, estate tax issues, family needs, etc.
Please consult with your attorney or financial advisor before applying or purchasing any of these policies, pay close attention to your specific state requirements, and also the financial strength and claims paying abilities of each company, funeral home, etc.