5 SMART WAYS TO PAY FOR YOUR FUNERAL THAT WON’T LEAVE YOUR FAMILY TO FOOT THE BILL
Considering the rising costs of funerals, ranging from $7,000 to $12,000 on average, it's prudent to include provisions in your estate plan to cover these expenses. However, relying solely on your will to allocate funds for your funeral may create unnecessary challenges for your loved ones.
When funds are earmarked in your will for funeral expenses, they can't be accessed until after your estate goes through probate—a process that can take months or even years. This delay often leaves family members with the immediate burden of paying for the funeral out of their own pockets while coping with the emotional strain of your passing.
To avoid placing such a financial and emotional burden on your family, it's essential to explore estate planning strategies that bypass the probate process. Here are five commonly used methods to cover funeral expenses efficiently:
Traditional Insurance: You can secure a new life insurance policy or increase coverage on an existing policy specifically to cover funeral costs. Unlike funds in a will, insurance proceeds are typically paid directly to the beneficiary upon presentation of the death certificate, bypassing probate delays.
Burial Insurance: Also known as final expense or memorial insurance, this type of policy is designed solely to cover funeral expenses. It's often available without a medical exam, though premiums can be higher relative to the payout. Consumer groups caution against these policies due to high costs and targeting of vulnerable populations.
Prepaid Funeral Plans: Funeral homes offer prepaid plans where you can pay for services in advance, either in a lump sum or installments. These plans may place funds in a trust or purchase a burial insurance policy, but they can carry risks such as insufficient coverage or loss of funds if the funeral provider closes.
Payable-on-Death (POD) Accounts: Banks offer POD accounts, also known as Totten Trusts, which allow you to designate a beneficiary to receive funds upon your death. These accounts avoid probate and provide immediate access to funds upon presentation of the death certificate. However, they are considered countable assets for Medicaid eligibility.
Living Trusts: A customized living trust can be created to specifically earmark funds for your funeral expenses. Unlike prepaid plans, a living trust allows you to retain control over the funds during your lifetime and specify how they are to be used after your death. This approach avoids probate delays and provides flexibility to adjust or dissolve the trust as needed.
Each of these options offers distinct advantages and considerations depending on your financial situation and family dynamics. Consulting with an estate planning professional can help you select the most suitable strategy that ensures your funeral expenses are covered without placing undue burden on your loved ones.
Planning ahead not only safeguards your wishes regarding your funeral arrangements but also provides peace of mind to your family during a difficult time. By incorporating these strategies into your estate plan, you can effectively manage your funeral expenses while protecting your family's financial well-being. Contact us today to explore how we can assist in creating a plan that meets your specific needs and preferences. Your foresight today can make a significant difference for your family tomorrow.
This article is a service of Zarda Law, SC. We do not just draft documents; we ensure you make informed decisions about life and death, for yourself and the people you love. That's why we offer Legacy Planning Session, during which you will get financially organized and make all the best choices for the people you love. You can begin by scheduling a Legacy Planning Session and mention this article to find out how to get this $750 session at no charge.
