The Importance of an End of Life Plan:
Nobody likes talking about the fact that some day they will die. However, not only is death a guaranteed outcome, but often times death occurs at an unexpected time much sooner than anyone anticipated.
So given the fact that death is inevitable, financial advisors simply cannot overlook or ignore this all-important piece of an overall financial or retirement plan.
Like so many families, when my family suffered the loss of a loved one, we faced the difficult decision of what to do next. Because we were never willing to accept this as a possible outcome, nor did we think about preplanning a funeral for this incomprehensible loss, we had no idea where to begin or who we could turn to.
Another funeral planning challenge that nearly every family faces is being forced to make difficult decisions in a timely manner, usually within a matter of days after a loved one has passed.
Therefore, most financial advisors are beginning to see that a sound comprehensive financial and estate plan must include your final plans and preferences, funeral service details, as well as prepaying your funeral costs and expenses.
10 Important Questions Your Clients or Prospects Have Probably NEVER Been Asked:
- What do you want your funeral service and/or memorial service to be like?
- Where would you like your funeral and/ or memorial service to be held?
- Who would you want to be there, and who do you not want to attend?
- Do you prefer to be buried or cremated? Is this documented anywhere?
- Where would you like your final resting place to be?
- What type of funeral home services would you like at your memorial service?
- Do you have plans to make sure your family can afford to pay for your funeral?
- Has your End of Life Plan been coordinated with your Estate Plan?
- Could your family, friends, and/or loved ones locate your important documents?
- Who is responsible for carrying out your estate and End of Life Plan?
Two Key Ingredients to a Smart End of Life Plan:
1) Preparing an Estate Plan
The sad truth is that approximately 70% of Americans die without even leaving behind as much as a Will, also known as a Last Will and Testament, which is designed to describe how they would like to distribute their wealth and other types of assets. What this means is that most Wills and Living Trusts are lacking some of the most critical information a family or loved one will need, which are the details regarding their final plans and preferences.
So if you think about it, the large majority of families are forced to deal with some of the most difficult emotional and financial pressures of planning a funeral, as well as determining how to pay for all of the funeral costs and expenses.
The key foundation to a solid estate plan is learning, choosing, creating, and most importantly, completing a Will or Living Trust. By properly completing one of these all-important documents designed to distribute your assets, you have clearly taken a step in the right direction. However, as you will see below, there are other equally, if not more important, estate planning matters that also need to be addressed.
2) Creating Your End of Life Plans and Preferences:
Similar to planning and preparing your estate plan, another extremely important task is creating an End of Life Plan. An End of Life Plan is specifically designed to address, in advance, the immediate concerns of your family and your loved ones. In other words, the main purpose is to be there at the time they need this type of advanced planning the most. This End of Life Plan includes using funeral insurance and burial insurance as some of the most common ways you prepay funeral expenses.
Key Features of Pre Need Plans, Final Expense Plans, and Funeral Trusts:
Advantages of a Pre Need Plan:
- A Pre Need Plan helps to itemize the exact costs of a funeral, including all the choices, such as a casket, burial vault, headstone, funeral director service, embalming, removal, transportation, preparation of remains, cremation and cremation urns, use of facilities for services and chapel, use of hearse, and many other options and preferences.
- Once you choose your final plans and preferences via a Pre Need Plan, you may also choose to prepay the costs such as a casket, cremation urn, funeral flowers, memorial service, etc.
- A Pre Need Plan is considered to be inflation-proof because it establishes a “price-freeze”. This inflation protection allows a client to contractually guarantee the total costs of their prearranged plan, regardless of any future inflation or funeral price increases.
Disadvantages of a Pre Need Plan:
- Unless a single-premium payment is used to fund this Pre Need Plan insurance, you must be alive a certain number of years in order for this insurance to pay for your complete funeral costs and expenses. In other words, if you choose to fund this plan over time using either a payment plan or installments, there is a possibility that your family and/or loved ones could only receive a portion of your funeral or burial insurance. These percentages and details vary depending upon the type of plan, payment methods, your health, and the year you pass.
- The total costs of a Pre Need Plan can vary greatly depending on your age, health, and the year in which you pass.
Advantages of a Final Expense Plan:
- With a Final Expense Plan, you can select a specific amount of insurance, regardless of the price of your end of life planning needs.
- Final Expense Insurance policies do not guarantee the price of the funeral costs, but rather guarantee a fixed amount of life insurance proceeds.
- When creating a Final Expense Plan, you have the flexibility to choose your beneficiary to be the Funeral Home, Cemetery, or your heirs… or any combination.
- If you choose a Funeral Home or Cemetery as your beneficiary, any excess funds are passed on to your heirs or estate.
- With a Final Expense Plan, if you have chosen the Funeral Home or Cemetery as your beneficiary, your family or heirs can use any excess funds for whatever they deem necessary. This includes paying for any outstanding debts such as credit cards, mortgages, hospital bills, or any other use of the funds they feel are appropriate.
Disadvantages of a Final Expense Plan:
- If you choose your family or loved ones to be the beneficiary of a Final Expense Insurance Policy, they have the right to decide whether to carry out the funeral plan you created… or not.
- Since the amount of insurance is usually a fixed amount, it may not be enough to fully cover the total costs of your funeral costs and/or the costs related to the settlement of your estate.
Advantages of a Funeral Trust:
- By using a Funeral Trust, your total funeral costs can be guaranteed (depending on your form of payment as mentioned above).
- The Funeral Home or Cemetery can be named as the Irrevocable Beneficiary to ensure all funds are used for your funeral costs and/or burial.
- The monies can be invested over time, creating the potential for your heirs to receive an amount greater than the amount of insurance.
- Funeral Trusts are administered by the state, heavily overseen, and regulated by the state.
Disadvantages of the Funeral Trust:
- Should the investment results not keep pace with inflation and the potential price increases for the cost of your funeral or burial, additional monies may be required at the time of death. (This can vary, depending on each individual state’s regulations.)
- Should your investment results be high, and the funeral home or cemetery is named as the Irrevocable Beneficiary, your family will not be entitled to any excess monies.
- You do not have any flexibility in choosing a beneficiary, as the proceeds must be made payable to the Funeral Home or Cemetery.
The financial industry is beginning to realize that an integral part of a sound financial and estate plan includes taking care of funeral plans, preferences, and even funeral costs… ahead of time.
An End of Life Plan gives your clients the ability to choose their method of disposition, the exact type of services they want, and can also take care of the large majority of their funeral expenses in advance. This offers their family and loved ones significant advantages, since they can now eliminate or minimize the grieving process, tough choices, and unexpected funeral expenses.
Having an End of Life Plan also allows your clients to make extremely important decisions through a calm and clear thought process. In other words, it is much more likely that they will make more rational and logical decisions. This helps to ensure their loved one’s memorial service and life tribute can be done in a meaningful way, and the way they would have wanted.
Although an End of Life Plan will not completely alleviate the emotional and financial stresses your clients will face, this will certainly help them reduce or eliminate many of the most stressful decisions, pressures, and expenses, and ultimately help ease the pain of a very difficult situation.
Whether using a Pre Need Plan, Final Expense Plan, or a Funeral Trust, the goal is to fully pre-arrange your End of Life plan. A fully completed End of Life Plan includes both preplanning your funeral as well as prepaying your funeral expenses.
This will offer your clients, their family, and loved ones the peace-of-mind of knowing they do not have to address any of these difficult questions, concerns, uncertainties, worries, or stresses at a time of such grief and loss… ultimately making a difficult situation a little easier.