Preplanning your final arrangements is an act of love. It’s something your family will appreciate more than you’ll ever know. By far the most important aspect to pre planning is securing a way to pay for your final expenses. Here’s the thing. If you don’t ensure your end of life costs are paid for, you condemn your family to paying them for you. So here’s a basic breakdown of what options you have to ensure you don’t leave your family with a financial burden.
Pre Need Arrangement
Often referred to as a “pre-need policy”, a pre-need arrangement is a contract setup directly with a funeral home. Essentially you predesign every aspect of your funeral. From the casket, the flowers and the service itself, you choose everything. The funeral home will calculate how much it will cost and give you two options to pay. First, you can put down cash and outright pay for all of it. If you can’t prepay in full, they will put you on a monthly payment plan.
Generally, they will try to get you to pay off the full balance in 2-5 years. However, you might be able to secure a longer payoff period if you need to. It just depends on the funeral home. Just make sure you look for a funeral home that has a clause that protects against inflation.
Another thing to ask up front before you sign the dotted line is what happens if you move. Can you transfer the arrangement to another funeral home? Can you get a refund? Ask these kinds of questions so you know up front.
With the life insurance option, you are counting on the proceeds of the policy to provide your family the money needed to pay for everything. If you’re short on cash or can’t afford big monthly payments for a preeneed policy, life insurance provides a way to immediately insure against your funeral costs.
Just be sure to make sure you get the right type or policy for your needs. Essentially, there are two main types of life insurance. There is temporary life insurance which is called “term life”. These policies last for a limited period of time whereby they expire at a prescribed date. Once the policy is over, you are no longer insured.
Then there is what’s called whole life insurance. These are permanent plans that last for your entire life (which is why they’re called “whole life”). With these, you can count on them being with you forever as long as you make your payments.
A specific type of whole life insurance is frequently marketed to seniors to cover their funeral bills. It’s commonly called senior final expense insurance. They are small face value whole life plans to give you just enough coverage to pay for your final expenses.
Regardless of which type of plan works best for you, make sure you work with a broker who can offer you options from multiple companies. Let them shop around to find you the best deal.
Setting aside money each month into a savings account could also work if you are disciplined. In the short term, this method won’t provide you with any “protection” against your funeral costs. But eventually you would amass the funds needed to cover all your funeral costs.
Just remember to view these funds as if they don’t belong to you. You must imagine the money saved as if it didn’t exist. Otherwise when an emergency arises you will spend it which means you won’t have it for your final expenses. Although redundant, we feel its incredibly important to say again that the savings account method is only for those who are incredibly disciplined.
Liquidate Your Assets
This really would be a last resort because of the time involved to execute this method, but your family could sell off all your real property to generate the necessary funds to cover your funeral bills. Unfortunately, this will take a while because of the probate process plus the time it takes to find a buyer. Having said that, you could go this route if absolutely necessary. Hopefully you have enough property to generate enough cash to pay for all your final expenses.
In the end, your family will greatly appreciate whichever method you choose to ensure your end of life expenses are take care of. Losing you will be the worst day of their life. The last thing they’ll want to do is scramble for money to honor your properly.