Death and Finance – 6 Funeral Arrangements to Make
You might think of it as your final responsibility, but preparing your financial affairs for when you die should happen long before you reach an age where you are likely to pass away. After all, when it comes to the responsibility of preparing for death, the only way to get it done is to be early. If you leave it too late, there won’t be anything you can do about it.
When a person dies, close friends and family members may be very upset. Suddenly, there are several details that have to be decided in a compressed period of time – decisions on things like organ donation, who to notify, funeral plans, and burial arrangements, and these demands come when people are not in a good emotional state to make decisions.
To avoid adding to this burden, you should resolve certain key financial issues before you die. In fact, it is wise to take care of those issues while you are still fairly young. For one thing, know one knows if they are going to die unexpectedly, and even if the worst does not happen, you might be in a better position to make rational decisions when death seems a long way off.
Here are five financial arrangements you should make for your death, even if you expect to live for many years to come:
1. Your will
Putting in writing your instructions about how your property should be distributed not only ensures that your wishes will be honored, but it also serves important functions for your survivors. Your will can direct your money and possessions where you think most appropriate, and clear instructions can prevent disputes among those close to you about who is entitled to what.
Keep in mind that a will should be an evolving document. Creating one is such a chore that people tend to think of it as a one-time task they can forget about once its done, but you need to account for the changes that can occur over time.
Issue of guardianship and trusts
For example, when your children are minors, providing for their guardianship is a big priority. When they are young adults, guardianship is no longer an issue. However, you may want to arrange for their inheritance to be distributed to them over time via a trust, rather than all at once.
Number of heirs may change
Also, the number of your heirs might change over time, and there is the possibility that your executor might predecease you. As much as possible, the will should be worded in ways that makes provisions for the possibility of such changes, but even so it is a good idea to revisit your will every ten years or so to make sure it still fits your wishes and situation.
2. Burial trust
A burial trust makes sure that there is money set aside for burial or cremation costs. This is especially important if your resources dwindle down to the point where you have to go on Medicaid. You are only allowed to have a small amount of money left in order to be eligible for Medicaid, but the amount placed in a burial trust is excluded from that eligibility requirement.
3. Life insurance
Oddly enough, life insurance may be most important when you are young, even though it is unlikely that you will die at that stage. One reason is that when you are young, you won’t have had a chance to accumulate much savings, so life insurance needs to fill more of the gap to take care of your dependents. Also, the younger your dependents are, the more financial assistance they will need before they get old enough to support themselves.
4. Power of attorney
It is wise to give someone the authorization to make decisions on your behalf should you lose the capacity to do so. Otherwise, those close to you may have to go to court to be able to manage your affairs. That can cause costly delays, and may result in someone other than the person you intended getting this authorization.
5. Brief key people of your finances
You should give your executor and your primary beneficiary a run-down of your financial situation, including an idea of what bank accounts and other property you have. This will help them know what to expect, and could save valuable time in tracking down property that should be included in your estate.
6. Succession planning for family business
If you own a business you want your heirs to take over when you’re gone, it creates special planning issues.
According to Steven Richards, the executive director of the Center for Cooperative and Enterprise Development at Clemson University, the first step is to think through who is best suited to manage the business after you. “Decide on who is to be the successor of the business. All heirs are loved equally, but not all heirs are the best choice for running the business in the future.”
That choice may be a hard one, but it is crucial. Once made, the decision should be reflected in your legal documents and communicated to your family members, says Richards. “Have a family meeting to discuss expectations of the outcomes of this process. A lot of times, this is where an estate/business planning facilitator is needed to get the process to completion.”
Richards warns that business owners tend to put off making these tough choices. “Owners tend not to want to have the hard discussions about the future of the business with their heirs, so they delay planning until it is too late.”
Putting off succession planning does neither your heirs nor your business any good. As with all the steps described in this article, these decisions need to be made early because you won’t be able to make them if you leave it too late. With any luck, you will turn out to have made these arrangements many years before they come into play.
More from MoneyRates.com:
How should I invest a burial trust?
‘Handicapped’ by wealth: The dangers of unprepared heirs