A lifelong financial plan should include not only goals and strategies while you're alive but also what happens to your assets after you pass away. And one often-overlooked area of post-mortem financial planning is your funeral arrangements. How can you include these when doing overall financial plans? Here are five steps to take.
1. Preplan Funeral Arrangements
In order to accurately determine how much you need to put aside for funeral costs, you'll need an idea of what you want. Start by meeting with a local funeral home to discuss your wants, needs, and goals. You don't necessarily need to have every decision firmly made, but you do need to put together a reasonable price range.
2. Account for Inflation
If you are preplanning your own arrangements as a younger individual, remember that you need to include inflation. Inflation rates — the rise in cost to buy the same goods or services — varies year to year, but it tends to average between 1% and 3% per year. The rate for 2020, for instance, was 1.4%. Adjust your goals to include this annual rise.
3. Set Aside Money for Expenses
You have several options when it comes to funding your funeral. You may opt to prepay for the exact plans you want through the funeral home. Some people use a bank account that is payable on death or a life insurance policy payable to the person who they want to handle the arrangements. And you could, of course, simply include funds in other accessible bank accounts.
4. Prepare the Right Documents
Your financial planner will assist with ensuring you have a number of important legal documents. These documents, such as a durable power of attorney for financial matters, allow your designated representative to make decisions with your assets. Funeral planning tools, though, should be kept separate from other estate planning documents so that they are opened first and used for immediate needs.
5. Decide What Happens to Leftover Funds
If you have planned your funeral arrangements well, your loved ones should have some money left over after everything has been done. What do you want done with this? Will it be donated, divided among heirs, used for an even larger funeral, or given to a specific individual? The choice is yours, but you should include this in overall estate planning.
Where to Start
The best place to begin any financial plan is with a visit to a qualified planner. By outlining your objective in preparing for your own funeral costs, you can count on their help to reach your goals. Make an appointment with a financial planner.