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In honor of Life Insurance Awareness month I wanted to bring you additional options for covering funeral costs outside of Life Insurance.
So just to be clear I believe that life insurance is important to help cover funeral cost (if the funds will not be accessible when you pass but it is also important to have so your family’s (children, spouse or anyone you financially support) will be able to keep the same quality of life after you pass away.
If you choose not to purchase life insurance due to being single with no kids or you have assets to leave to your family that’s great but what people don’t realize is depending on how bank accounts, retirement and investment accounts are set up you may not be able to access those funds until after the funeral due to those accounts going to probate or who you choose as beneficiary on your accounts. The average cost of a funeral in 2017 was 7319 according to the national funeral directors association.
Some funeral homes do offer the option of a payment plan or deferred payment if you can prove there will be assets, Life Insurance, investment accountant etc., available in the future but every funeral home is different.
Pre-pay funeral expenses. Some people prepay their funeral expenses through a funeral home so their family doesn’t have to worry about paying once they pass away. Now I have personally seen this work well for an older family meamber but I have also read that this is an option you don’t want to more than 2 year out. 🤔 Which in some cases is hard to plan. The reason being the funeral home may go out of business or it may change ownership and the new owner may not honor the contract with the old company.
Joint Savings Account - You can also choose to place the funds needed to pay for your burial expenses in a joint account with your spouse or someone you trust. They would know to only access the account if you pass away and what to use the money for. The good thing about this account is that you can add money over time and it will be easy for the other owner to access the funds if you pass away. But you want to keep in mind is the joint owner can take the funds out of the account at anytime without your permission and there is nothing you can do about it so make sure it’s someone you trust.
Totten Trust - So I had to reach out to my friend, Licensed Financial Advisor, and Author, Kevin Matthews to get more information about this one. A Totten Trust is a bank account that has a beneficiary on the account and is transferable at upon death. The benefits of this account is that it is just like a regular bank account but the beneficiary can not access the funds until you pass away. Kevin said that these accounts do not require trust documents and they do not require a minimum contribution to open since it’s just a regular bank account. So you have the opportunity to open the account the continually contribute to the account until you’re comfortable that the account would cover your funeral costs.
Hopefully these options are helpful, the last thing you want your family to be worried about when they are in mourning is how to cover your funeral costs. These are options that you can past share with your family members.
