Use Estate Planning to Ensure Your Family Isn’t Stuck Paying For Your Funeral

With the cost of a funeral averaging $7,000 and steadily increasing each year, every estate plan should include enough money to cover this final expense. Yet it isn’t enough to simply set aside money in your will.

Your family won’t be able to access money left in a will until your estate goes through probate, which can last months or even years. Since most funeral providers require full payment upfront, this means your family will likely have to cover your funeral costs out of pocket, unless you take proper action now.

If you want to avoid burdening your family with this hefty bill, you should use planning strategies that do not require probate. Here are a few options:

Veteran Burial Benefits

The first strategy should always be maximizing earned benefits. The VA offers monetary burial benefits to pay eligible survivors.  If you are a Veteran check your eligibility for funeral benefits.

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You can purchase a new life insurance policy or add extra coverage to your existing policy to cover funeral expenses. The policy will pay out to the named beneficiary as soon as your death certificate is available. But you’ll likely have to undergo a medical exam and may be disqualified or face costly premiums if you’re older and/or have health issues.

There is also burial insurance <embed link specifically designed to cover funeral expenses. Also known “final expense,” “memorial,” and “preneed” insurance, such policies do not require a medical exam. However, you’ll often pay far more in premiums than what the policy actually pays out.

Because of the sky-high premiums and the fact such policies are sold mostly to the poor and uneducated, consumer advocate groups like the Consumer Federation of America consider burial insurance a bad idea and even predatory in some cases.

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If you have any type of insurance to cover your funeral, make sure your family knows about it! These policies are often never cashed in because the family didn’t know they existed.

Prepaid funeral plans
Many funeral homes let you pay for your funeral services in advance, either in a single lump sum or through installments. Also known as pre-need plans, the funeral provider typically puts your money in a trust that pays out upon your death, or buys a burial insurance policy, with itself as the beneficiary.

While such prepaid plans may seem like a convenient way to cover your funeral expenses, these plans can have serious drawbacks. As mentioned earlier, if the funeral provider buys burial insurance, you’re likely to see massive premiums compared to what the plan actually pays out. And if they use a trust, the plan might not actually cover the full cost of the funeral, leaving your family on the hook for the difference. Plus, most states have inadequate laws protecting funds in pre-need plans, putting your money at risk if the funeral provider closes or is bought out by another company.

In fact, these packages are considered so risky, the Funeral Consumers Alliance (FCA), a nonprofit industry watchdog group, advises against purchasing such plans. The only instance where prepaid plans are a good idea, according to the FCA, is if you are facing a Medicaid spend down before going into a nursing home. This is because prepaid funeral plans funded through irrevocable trusts are not considered a countable asset for Medicaid eligibility purposes.

If you’re looking to buy a prepaid funeral plan in order to qualify for Medicaid, be sure to consult with us first, as not all pre-paid funeral plans are actually Medicaid compliant, even if the funeral home says they are. Moreover, if the irrevocable trust is not set up correctly, it may violate Medicaid’s look-back period, delaying your eligibility.

Payable-on-death accounts
Many banks offer payable-on-death (POD) accounts, sometimes called Totten Trusts, that you can set up to fund your funeral expenses. The account’s named beneficiary can only access the money upon your death, but you can deposit or withdraw money at any time.

A POD does not go through probate, so the beneficiary can access the money once your death certificate is issued. POD accounts are FDIC-insured, but such accounts are treated as countable assets by Medicaid, and the interest is subject to income tax.

Another option is to simply open a joint savings account with the person handling your funeral expenses and give them rights of survivorship. However, this gives the person access to your money while you’re alive too, and it puts the account at risk from their future creditors.

Indeed, we know one client who lost the money in a joint account she shared with her granddaughter over a single bad business decision. The granddaughter was sued over a lease default, and when she lost the case, her creditors were able to go after the joint account.

Living trusts
With us as your Personal Family Lawyer®, you don’t need to buy a pre-built trust from a funeral provider. We can create a customized living trust that allows you to control the funds until your death and name a successor trustee, who is legally bound to use the trust funds to pay for your funeral expenses exactly as the trust terms stipulate.

With a living trust, you can change the terms at any time and even dissolve the trust if you need the money for other purposes. Alternatively, if you need an irrevocable trust to help qualify for Medicaid, we can create that too and help you ensure the trust stays totally compliant with all of Medicaid’s requirements.

Don’t needlessly burden your family To help decide which option is best suited for your particular situation, consult with us as your Personal Family Lawyer®. We can put an estate plan in place that includes adequate funding to ensure your funeral services are handled just as you wish—and your family isn’t forced to foot the bill.

This article is a service of Stephanie Scarborough, Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.

Don’t Let Your Elderly Parents Become Victims of the Grandparent Scam

Imagine this… You are an elderly grandparent who lives alone.

You get a call in the middle of the night from your college-aged granddaughter. She’s frantic and crying, telling you she was mistakenly arrested while vacationing in Cancun.

She says she needs you to pay her $1,800 bond, or she’ll be transferred to a dangerous Mexican prison. The Mexican police told her she only has a few hours before she’s transferred, so she needs you to wire the money immediately.

She’s petrified about her parents finding out she was arrested and begs you not to tell them. Because she only has a couple of minutes to use the police station phone, the call ends abruptly before you can get any further details.

What do you do?

If you’re like the thousands of others who’ve gotten just such a call, you’d probably wire the money in a heartbeat. It is your grandchild’s life after all. However, just like the others, you’d soon find out that your granddaughter hasn’t been arrested and was never in Mexico.

The Grandparent Scam
Known as the Grandparent Scam , this con has been around for years, and while it may seem far- fetched, it has tricked many caring seniors. I answered the phone earlier this week to a young man saying “Grandma.”  His voice was sad and he sounded frightened.  I told the young man I was aware of this scam and hung up.   However, I’m not a grandparent (at least not yet) and I’m an attorney who has had to help clients who were victims of this scam. Unfortunately, in recent months, there has been an uptick in the number of people falling prey to the deception.

The details can vary, but the scam typically works like this:

1) You get a call from someone pretending to be your grandchild. The “grandchild” explains he or she is in trouble and needs money immediately. They might be in jail and need bond or be stranded in a foreign country and need money to get out.

2) The caller asks you to wire money to a specific location or give it to a third party, usually someone posing as a lawyer or police officer.
3) The “grandchild” will often plead with you not to tell their parents they’re in trouble.

4) Once you send the money, the caller breaks off all contact, making it impossible to recover your funds.

Preying on the vulnerable
While just about anyone can fall for such scams, the elderly are the ones targeted most often. This is due to the fact that seniors are frequently lonely and eager to hear from family. And whether it’s because their hearing is failing or because they haven’t seen their family members in a while, they’re more likely to not recognize voices.

Due to their advanced age, seniors are also less likely to think clearly in a crisis, making them more susceptible to fear and panic. Finally, the elderly are less familiar with technology and social media, so they don’t realize how easy it is to access enough of someone’s personal details to make the scenario seem realistic.

What to do

In most cases, the best course of action is to simply hang up and contact the authorities. However, if the caller really does sound like the family member they claim to be, here are some steps you can take to help verify the situation is legitimate:

1) Don’t panic. It’s far easier to be deceived if you’re nervous or scared.
2) Be wary of calls from unknown or blocked numbers. Ask to call them back on the person’s own phone, and never accept requests sent solely by email or text.

3) Verify the caller’s identity by asking them questions only the actual person would know the answer to, such as the name of their first pet.

4) Beware of urgent demands that money be sent immediately. Reputable sources don’t try to pressure you into making split-second financial decisions.

5) Call other family and friends to verify where the person is. A reputable source will respect your caution and give you the opportunity to verify the facts.

6) Requests for money to be wired are often scams, as it’s nearly impossible to get your money back in cases of fraud. Request a more secure transaction method, such as through a bank or PayPal. Legitimate sources are likely to offer multiple payment options.

Comprehensive protection

Please share this article with any seniors in your life. There are countless other scams out there that work in much the same way, so even if it’s not this particular con, by becoming aware how these deceptions work, they’ll be much less likely to fall for them.

Of course, scams and cons are just one threat to seniors’ financial security. Without comprehensive estate planning, there are numerous other ways your family’s wealth and assets can be squandered or lost which have nothing to do with fraud.

This article is a service of Stephanie Scarborough (internal like to my bio), Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today  (internal link to our contact us form) to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.