3 crucial end-of-life plans to complete
Part of preparing for death is planning for your family’s finances in advance. Can they easily pay for your funeral? Will there be property tax? Can they continue their standard of living, or will they be thrown into financial turmoil?
Even if you are not worth millions of dollars, you still have an estate. One Estate planning is not just for the wealthy or older.
The executor will be responsible for the estate settlement. They are responsible for collecting money owed to your estate, paying outstanding debts and distributing the money left in the estate.
In addition pay off credit card debt, car loans and personal loanspayments of debts will include any federal and state income, estate and inheritance taxes. An estate must be quite large to be subject to a federal estate tax, but even modest estates can be subject to a state estate tax.
The money to settle the estate comes from your assets. If you don̵7;t have enough cash, property will be sold to pay off those debts. This means your heirs inherit less.
One way to ensure that your heirs inherit your assets is to get life insurance.
Life insurance is included in your taxable estate, but it is not taxed when it is paid out to your beneficiaries. Your heirs can use the policy’s death benefit to pay off your debt and estate taxes rather than selling sentimental assets to make these payments.
Term life insurance
Most families only need life insurance. Life insurance pays a death benefit if you die while the policy is in force – term options range from 10 to 40 years.
Term life insurance protects against what happens in life. “What if I suddenly die in a car accident?” “What if I’m diagnosed with cancer?”
With life insurance, your family receives a death benefit if you die prematurely. The death benefit can be used for pay for end-of-life expenses and the everyday things your paychecks once covered.
Permanent life insurance
If you have a large estate or loved ones who will be financially dependent on you for life, you will benefit from permanent life insurance. Permanent life insurance, whole life insurance is one of the most common, is designed to last your entire life. This policy provides a death benefit when you die, don’t you if you die.
Because of the tax benefits, permanent life insurance is often used for high net worth estate planning. It is also a popular way to pay estate taxes and provide liquid inheritances to beneficiaries.
Because of the high premiums of permanent life insurance, the majority of families would benefit most from purchasing term life insurance while putting money into emergency savings and retirement funds.
Not sure what type of life insurance is best for your situation? Read more this spring term vs whole life guide.
Some people have specific wishes about how they want to be buried. Others don’t care that much at all. Even if you’re the latter, consider documenting your preferred funeral arrangements so your loved ones don’t have to stress about it.
It is recommended that state your wishes in both your will and living will. Tell the chosen executor or other trusted person where your final wishes are documented.
Burial vs Cremation
The first step in preparing for the end of life is choosing whether you would rather be buried or cremated. Costs differ significantly between the two.
- Average funeral cost: $7,000 – $12,000.
- Average cremation cost: $1,000 – $3,000. Cremation is much cheaper as no burial fees, caskets, cemetery fees or headstones are involved.
If you choose to donate your body to science, this is often cheaper overall because the organization receiving your body pays for many expenses.
Funerals can be held regardless of whether you are buried, cremated or donated. Funerals usually have four parts:
If there are specific things you want done at your funeral, tell your family. For example, people often say that they want a certain song to be played or that they prefer a donation to charity instead of flowers.
Prepare for your death financially so that your loved ones are not struggling to find money for a funeral. Here are some of the costs to consider*:
- Non-deductible funeral service fee: 2,300 USD (covers the cost of planning, permits, death certificate paperwork and administration fees)
- Additional service charges: $1,400 (things like transporting the body to the funeral home and preparing the body)
- Use of facility: $515
- Sleeper: $350
- Casket: $2,500 – $10,000
- Vault: $1,572 (not always necessary)
*Dollar amounts are based on a study by National Funeral Directors Association.
In addition to a funeral, people often gather for a reception, memorial service or celebration of life. This may include additional costs such as a venue, food, drinks and music.
Find life insurance to cover the plans for final life
End-of-life planning relieves your family of a huge burden. When your loved ones are grieving your death, the last thing you want for them is financial battles and arguments over your last wishes.
Preparation for the end of life checklist:
- Last will and testament
- Lasting power of attorney
- Living will
- Healthcare power of attorney
- Funeral/burial arrangements
- Life insurance
If you don’t already have life insurance, take some time now to think about how your family would be affected financially if you died suddenly. You should have enough life insurance to replace your income and cover end-of-life expenses.
If you’re not sure how much you need, try our free life insurance needs calculator. As an independent broker, Quotacy is your advocate in the life insurance buying process.
Not sure where to start? Read more: How to buy life insurance wisely: a step-by-step guide