With the cost of a funeral averaging between $6,000 and $10,000, your estate plan should at least include enough money to cover this final expense. And if you are thinking of simply setting aside money through your will to cover your funeral expenses, you should seriously reconsider. Structuring it this way, your family may not be able to access those funds until your estate goes through the court process of probate, which can last months or even years. Since most funeral providers require full payment upfront, your family will likely have to cover your funeral costs out of pocket and deal with all of this while grieving your death.
If you want to avoid burdening your family with such a hefty bill and the stress that comes with it, you need to use planning strategies that do not require probate.
01 | Traditional Insurance
One of the best options is purchasing a new life insurance policy or adding extra coverage to your existing policy to cover funeral expenses. Unlike money left in your will, an insurance policy does not go through probate, and it will pay the death benefit to the named beneficiary as soon as your death certificate is filed with the insurance company.
02 | Burial Insurance or Final Expense
In addition to traditional insurance, you can also purchase burial insurance, which is specifically designed to cover funeral expenses. Also known as “final expense”, “memorial” and “preneed” insurance, such policies do not require a medical exam. However, you’ll often pay far more in premiums than what the policy actually pays out.
Due to the hefty premiums and the fact such policies are sold mostly to the poor and uneducated, consumer advocate groups like the Consumer Federation of America consider burial insurance a bad idea and even predatory in some cases since these policies are often sold to lower income populations.
One final point about using insurance to pay for your funeral: If you have any type of insurance to cover your funeral, it’s crucial that your family knows about it. Far too often, insurance policies are never cashed in because the family didn’t know they existed. Don’t let this happen to you—make sure your family knows about any insurance policies you have as well as how to locate the necessary paperwork.
03 | Prepaid Funeral Plans (Recommended)
Johnson Brown-Service Funeral Home Prearranged Funeral program lets you pay for your funeral services in advance, either in a single lump sum or through installments. Also known as pre-need plans, Johnson Brown-Service Funeral Homes deposits 100% of your money into a trust that pays out upon your death, or buys a burial insurance policy, with itself as the beneficiary. Once this contract is paid in full, you get the benefit of Johnson Brown's Exclusive Price Guarantee. No set time, payment, fees, or interest.
04 | Payable-On-Death Accounts
Many banks offer payable-on-death (POD) accounts, sometimes called Totten Trusts, that you can set up to fund your funeral expenses. The account’s named beneficiary can only access the money upon your death, but you can deposit or withdraw money at any time.
A POD account does not go through probate, so the beneficiary can access the money once your death certificate is issued. POD accounts are FDIC-insured, but such accounts are treated as countable assets by Medicaid, and the interest is subject to income tax.
Another option is to simply open a joint savings account with the person handling your funeral expenses and give them rights of survivorship. However, this gives the person access to your money while you’re alive too, which puts your money at risk if the person goes into debt or gets sued and their creditors come after your account to pay the other person’s debt.
Given this risk, we recommend you consider other options that will allow you to pay your funeral expenses, without leaving your finances vulnerable to another person’s mistakes or poor money management.
Use Estate Planning to Avoid Burdening Your Family
Although thinking about your eventual death is never easy, with the proper planning you can make dealing with the aftermath of your death significantly easier for the loved ones you leave behind. To avoid needlessly burdening your family with the expense and stress of planning and paying for your funeral, make sure your estate plan includes the necessary funds to cover this expense, and be sure to use an estate planning strategy that will allow your family to access these funds as quickly and easily as possible—ideally by using an option that avoids probate.
With so many different options to choose from, consult with us to find an estate planning vehicle that is best suited for your particular situation. With our guidance and support, we will develop a planning strategy that includes adequate funding to ensure your funeral services are handled in the exact manner you desire—and your family won’t be forced to foot the bill. Contact us today to learn more. (334)768-3024