End of Life
Preplan Your Funeral
and Prepay Final Expenses
Most people tend to overlook one of the greatest gifts you will give your family, which is properly preparing them for the inevitable. At best, you might have started your estate planning process by creating a Last Will or Living Trust. However, the harsh reality is that approximately 70% of Americans have NO form of estate plan. So by having a Will or Trust, you have clearly taken a step in the right direction toward preplanning your future financial wishes. The problem is, this form of planning fails to accomplish the most important task, which is addressing your family’s immediate concerns.
The person, or in most cases people, responsible for taking care of your final arrangements are usually forced to make extremely important decisions, as well as major financial purchases, within a small time frame…usually within approximately 48 hours after your death. Of course, you cannot expect to fully alleviate the emotional and financial stresses of your loved ones during such a difficult time, but you can help them tremendously by having a plan that outlines your funeral wishes.
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. When you preplan a funeral, this gives you the ability to choose your method of disposition, the exact types of services you want, and allows your family to focus more on things such as grieving and recovery. In addition, preplanning 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.
When preplanning your funeral, here are some general guidelines to begin the process of creating your end of life plan:
- Visit various funeral homes and interview multiple Funeral Directors
- Choose a Funeral Home and Funeral Director your family would be most comfortable with
- Consider bringing family members with you during this selection process
- Be aware and informed of bereavement entitlements such as veterans, union, fraternities, etc.
- Consider religious and moral convictions, and discuss them with your family
- Determine your place of disposition such as a burial, cemetery, entombment, cremation, etc.)
- Plan your ceremony considering things like casket viewing, religious aspects, etc.
- Consider itemizing all of your funeral costs to see if prepaying your funeral expenses makes sense
- Decide the funeral service details, such as how to give a funeral eulogy, pall bearers, which Church, etc.
- Prearrange any preferences for your memorial services, such as the funeral music, the location, who should attend, where it should be held, and taking advantage of some of the new funeral memorial technology tools available
- The Federal Trade Commission offers a free funeral planning guide titled “Caskets and Burial Vaults” (202-326-2222) which has made it easier for consumers to comparison shop.
- The FTC Funeral Rule requires Funeral Directors to always offer pricing information over the phone. This rule also requires that Funeral Homes have a General Price List readily available, which is a comprehensive list of all of the funeral merchandise, services, and funeral costs. 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 the FTC’s website.
Prepaying for Final Expenses
Although planning your funeral arrangements in advance 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, prepaying 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:
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 costs 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.
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 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, college, etc.
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 whether a pre need plan or a final expense plan will cover the common funeral expenses such as your funeral service, viewing, funeral 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 funeral and burial insurance companies that can offer various funeral planning packages, as can most Funeral Homes and Cemeteries.
PreNeed Trust Agreements
Another alternative to prepaying your funeral expenses 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. However, 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 some funeral and memorial services planning to cost much more than anticipated.
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 also very important that you consider reviewing key factors such as your age, health, financial status, objectives, liquid assets, tax issues, estate tax issues, family needs, etc.
Finally we cannot encourage you strong enough to consult with a qualified Estate Planning Attorney and Financial Advisor. Also, before you decide to apply or purchase any funeral insurance, check out details such as the company’s state specific requirements, learn about the company’s financial strength and rating, as well as review their history of claims paying.