While planning for end-of-life finances is not the most exciting topic, the reality is that it is crucial in order to best protect loved ones. By beginning the planning process as early as possible and keeping up with the details of your financial well-being throughout the years, you can help ensure you and your family are prepared.
Let’s dive into the important aspects of preparing for end-of-life costs, though keep in mind you may want to speak with a qualified professional to see what is best in your unique case.
1. Term Life Insurance
One of the first steps to preparing for end-of-life costs is to purchase a life insurance policy that will pay out a lump sum to beneficiaries upon your death. A term life insurance policy is typically the most cost-effective option and covers a set amount of time as outlined in the initial details of the term policy.
While life insurance can generally be purchased at any time, factors such as health complications and conditions can make it more difficult and expensive to secure a policy. For the best term life insurance options, pick a policy as early on as possible so that you, your assets, and your loved ones are covered.
2. Wills and Living Trusts
To preserve your finances both during your lifetime after you’ll need legally binding documents affirming your wishes. Oftentimes, you will need to choose between a will or testament and living trust. The former are used interchangeably and are essentially a document that outlines how your assets will be divvied up in the case of your death.
These documents will also outline an executor who will be responsible for everything through the division of your estate. They must be signed and witnessed as part of a lengthy legal process. On the other hand, a living trust involves less hassle and allows the person to designate their estate and assets to their beneficiaries as part of estate planning during and after their death.
Without a declared plan for your assets at the time of your death, your family will need to go through the hardship of lengthy court processes to see who gets what, if anything.
3. Outline Your Funeral Wishes
If you’re not concerned with the actual process of your funeral or afterlife care, then this step may not be a necessary one. However, it’s important to consider the immense costs of end-of-life services and to plan for those too, or else the burden falls onto your loved ones.
If you had a term life insurance plan or similar as mentioned above, the benefit amount can go toward those costs, but in any case, you will want to prepare to the best of your ability. In some cases, you may be able to prepay the costs of the services if you wish to do so out of pocket to your chosen funeral home. If you don’t outline your wants or plan for them, then your family will have full discretion over your end-of-life services and need to carry the costs.
4. Gather All Important Documents
This step can prevent a major headache for your family and help to prevent financial catastrophe in the event of not having the necessary paperwork to take care of a liability or asset. Important papers can include your social security card or number, date of birth, employers’ information, information on loved ones such as names and numbers, information for financial and end-of-life planners, any legally binding documents such as trusts, and wills.
Additionally, you will want to keep careful track of financial information such as health insurance info, home deeds, mortgage information, or other home-related documents, bank account information, tax returns, and investments.
5. Update Beneficiaries Often
Within each of these steps and throughout your life, you will want to ensure that the beneficiaries on any insurance or accounts are up to date. If someone in your family passes away or someone is otherwise no longer a part of the family, it’s important to update your information to reflect who you want your plans to benefit from.
