Planning Ahead for the End

Not only do Facebook users have a way to update their friends on the latest happenings in their lives, but the app called “If I Die” now allows Facebook users to plan their final status update in advance. The app lets up to three Facebook friends become “trustees” of your final words. Upon your death, those friends can post the postmortem messages “from the deceased.”

Although that might sound a little morbid, planning ahead for the inevitable can offer peace of mind knowing that your loved ones are spared from having to make these difficult decisions for you.

Where to begin

While a last will and testament or living trust are considered to be some of the most important documents to have when planning your estate, preplanning can come in many forms. Whether you are planning for a loved one who is terminally ill or preplanning your own funeral, making the proper arrangements is an important first step to getting organized.

The late Apple tycoon Steve Jobs was a meticulous planner, not only when managing his billion-dollar company, but also with his personal estate planning. Although a private individual, Jobs was known to have been thorough and particular in taking care of his loved ones and ensuring his wishes would be carried out. Going a step further, Jobs hired famous biographer Walter Isaacson to write his authorized biography, which was Jobs' way of leaving his children a non-financial legacy.

While not everyone has the means to hire a famous biographer to detail their legacy, there are a few steps you can take to help ensure your family will be taken care of after you're gone. It doesn't have to be difficult either—planning how your final wishes will be fulfilled can be an enlightening experience.

Preplanning a funeral

Preplanning a funeral not only allows you the freedom to plan the details exactly the way you would like, but it can also help relieve loved ones of having to make these decisions during their time of grief. Aside from the most common ways people preplan their funeral—choosing a plot, deciding whether to be cremated or buried, or purchasing a casket—you can also add a more personal touch such as writing your own epitaph, selecting music or flowers, or designing a memorial of your life.

Depending upon state law, funeral arrangements can be outlined in a last will, including where it should be held, how it is going to be paid for, and even a limit on how much is spent. You should do some research if you are considering prepaying for your funeral. You might consider whether or not you could move away from the area where the funeral home is located, if you might need the money for unforeseen expenses in the future, or whether you could simply change your mind later in life. Above all, you should make sure the funeral home you're planning to use is a reputable one.

Funeral insurance

Similar to life insurance policies, funeral insurance covers costs that are directly related to the funeral and can be purchased through insurance companies and certain funeral homes. The insurance coverage can include, but is not limited to, the embalming process, burial plot, flowers and grave marker. In addition, funeral insurance is flexible, in that the purchaser can choose the exact amount that the insurance will cover. For example, if you want to insure your funeral for $5,000, you can have the peace of mind knowing the exact amount of coverage at the time of your death. This amount is also free from tax, can be offered to be paid interest-free, and will not be considered an estate asset.

When purchasing any type of insurance, you should be aware of the advantages and disadvantages. For example, funeral insurance can be costly and it's best to research different policies before you make any decisions. In addition, funeral costs can double in a ten- to twelve-year timeframe, yet many insurance policies do not take into consideration the inflation of funeral expenses. Purchasers can protect themselves from this issue by purchasing insurance through a funeral home that guarantees the price of the funeral. However, the funeral home may then have the ability to retain any funds that are not used for the funeral expenses. In addition, many state laws do not protect funeral prepayments if one moves or changes his or her mind, allowing the funeral director to legally keep the prepaid monies in the event they are not used for funeral expenses.

Payable on death accounts

In addition to funeral insurance, another financing option available is a Payable on Death (POD) account. A POD account allows flexibility to set aside monies, stocks, bonds or other assets to either be used to pay for a funeral or to be allocated to specified beneficiaries. One of the biggest advantages of POD accounts is that they provide liquidity, in that monies can be transferred to the beneficiaries without probate, which can sometimes be a costly and time-consuming court-supervised legal proceeding in which the assets of a deceased person are divided amongst loved ones. 

Unlike prepaid funeral plans, POD accounts can be closed without penalty and can be tailored to assist more than one beneficiary, as numerous POD accounts can be created that allow the individual to leave different amounts to several beneficiaries. However, a POD purchaser should be wary of service fees on the accounts and taxable interest earned on the account.

Get expert advice

Preplanning your own funeral can be one of the most considerate things you can do for your family, but whichever options you are considering should be analyzed thoroughly before you sign any contract. When in doubt, seek the advice of a qualified attorney who can assist you.

If you are planning ahead to help protect loved ones, you can start with a last will, living trust, living will, or power of attorney. The comprehensive packages also come with attorney support. Or you can sign up for the Personal Legal Plan anytime.