For tomorrow belongs to the people who prepare for it today.
African Proverb
No one likes talking about death, but that doesn’t mean you shouldn’t. In fact, you should be talking about end of life planning a lot more than you think you should.
Seventy percent of families have strong misconceptions about the value of an estate and more than 30% of children don’t even know the value of their parents’ assets, says a study from Fidelity Investments. It probably doesn’t help that most inheritors haven’t talked to their benefactors about their eventual wealth.
Discussions around estate and succession planning can be emotionally charged, so families tend to shy away from them but for families that want to leave a legacy and ensure the nest egg they have built is protected across generations, communication and planning are key.
Why you need to have a will and estate plan.
The sooner children understand major money matters – like estate planning, the better. But that raises the question, “what exactly is estate planning?”
Estate planning is comprised of wills, which is your very basic document saying who gets what, and who’s in charge of your estate. In the estate planning process, people are also designating someone to make healthcare decisions for them while they’re alive.
It’s best to start out with outlining your estate plan exactly the way you want to.
How large is your estate? What’s your family situation like? Children, step-children, grandchildren, and other relatives may be considered when making a plan.
Estate planning tips
Estate planning attorneys can help you create a plan that is right for you. It’ll cost you, but making sure you’re doing everything legal and correct is worth it. You don’t want your death to create any drama.
Confirm your money is in line with your estate. Being financially aligned with your estate plan should be essential. Remember when you’re done planning doesn’t mean you can’t change something later. It can be updated and changed any time you want it to.
Once you’ve got a handle on your will and estate, make sure inheritors know exactly what is coming. Let them know that they can ask any questions, regardless of how uncomfortable they are, so they understand everything that should happen after you pass. Just because they are hard to ask doesn’t mean it isn’t necessary.
Who you list in the will to receive your assets are referred to as beneficiaries. Everybody should have beneficiaries listed on their financial accounts. A few accounts to add beneficiaries to…
- Life insurance
- Retirement accounts
- Checking
- Savings
- Brokerage accounts
Funeral planning
If you don’t face your own mortality, your loved ones will face a different truth: Overspending.
Modern American culture has a taboo against discussing death. After all, who likes planning out their burial plot when they’re young or healthy? But this way of thinking hurts us financially.
People tend to leave the funeral planning to their loved ones, making them guess what the deceased wants and limiting the ability to shop around.
No one wants to make a quick decision on a costly item when the emotional stakes are high.
The national median cost of a funeral with viewing and burial for 2017 – the latest year this data is available – was $7,360, according to the National Funeral Directors Association. But just because that’s the median cost doesn’t mean you need to spend it.
Joshua Slocum, executive director of death industry watchdog Funeral Consumers Alliance (FCA), gave us tips to follow as you plan your funeral in advance when you don’t believe death is near.
1. Follow a budget
There are a lot of details that people often consider for a funeral: cremation or burial, type of casket, and myriad other choices. But the first step is establishing a budget.
When you’re planning, understand and articulate with your family clearly what a comfortable budget is one that does not require you to take on debt. How much money do you have – not how much you think it has to cost.
2. Shop around
Once you’ve chosen a service, compare prices in your area. If there’s a local FCA group, check there first for local price surveys. Large price discrepancies, sometimes up to thousands of dollars, exist between different funeral homes in the same city. That information can help you narrow down which funeral homes to consider for a more detailed quote.
When you visit funeral homes, ask for their price lists on paper (which they’re required by federal law to provide) so you can look at their prices at home, outside of a sales context. And ask funeral homes specific questions if you don’t understand something.
If you need help during the planning process, contact the FCA.
3. Talk with your loved ones
Have a conversation about the funeral arrangements with your family or the circle of people closest to you.
Don’t merely tell your survivors what you want. It’s awfully selfish if you don’t go further and add on to that, ‘Hey, guys, you’re going to be here when I’m gone. What do you think will work for you? What would make you feel better and what would you find meaningful?’ Make it a dialogue, not a dictation session.
After you have that talk, write down the decisions and the prices you found in your area. Make physical copies of these and hand them to your family. If you have it in an email, safe deposit box, or password-protected file, people will overlook these at the time of death.
4. Don’t forget that a casket is just a box
People are accustomed to spending $2,000 or more on a casket, but that number should make them pause. It is simply a box, and they’re vastly marked up over their wholesale price.
If you find a casket on your own, funeral homes must legally accept it without charging a fee. (The same goes for urns.) Choose a casket using two criteria: Is it affordable for you, and does it appeal to your eye?
Remember that caskets do only one thing, and every casket does it just as well as another: It simply holds the body.
5. Never prepay
There are a few reasons to never prepay for a funeral. You could move cities. You may want to choose a different funeral home later because your choices have changed.
Do you really believe that you will want exactly the same thing at 78 as 40-year-old you would? Most of us, by the time we’ve gotten to middle age, realize how much things can change.
6. Keep returning to your decision
Funeral shopping is not a one-stop process. If you’re 40 years old and you’re planning for a funeral ahead of time, you need to revisit the decision every few years or if you move.
Rechecking costs can also save you money. Sometimes prices lower over time because conditions have changed.
Most Americans don’t have a plan to transfer an inheritance
Determining your financial stability on a windfall of cash from a loved one may not be the wisest choice. And what if you never receive that inheritance?
As previously outlined, an estate plan is a preparation of moving one’s assets over to their surviving family members after their death. The family will need to settle their estate taxes which typically involves an attorney with a background in estate law.
When it comes to legacy planning, generally speaking, the sooner the better. Failing to have an estate plan in place can lead to significant family confusion once a beloved family member passes. Too often, it may result in costly mistakes or the wishes of a loved one’s estate and legacy plans going unfulfilled.
Stay Loose
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