Near Intersection of I-35 & I-90 Southern Mn. | We are all glad to hear of Megan's progress. I suspect that these recent events have prompted your concerns about final expenses. This is a difficult area for everyone but especially those at a young age.
I have done some prepaying and other plans for my final demise. My situation is vastly different than yours or most. I am an old bachelor with no children. My parents died just about exactly one year apart. They were in their 80's. My brothers, sister and I lived within 6 miles of the folks so distance wasn't an issue. We were able to plan our parents funerals and things went well in that respect.
Mother and Dad had purchased three lots in the local cemetery from a family who had left the area. This means that there was a lot for each of them and me. My brothers and sister asked me to arrange the purchase of a Tombstone for our parents graves. I purchased one for myself at the same time.
I had heard of the term of "prepaying" ones funeral. I investigated this idea and purchased what amounts to as an annuity which would hopefully cover the cost of a funeral. At the time I decided that I wanted a funeral of the type and style that my parents had. The idea was that the annuity would hopefully grow in value to offset any increase in the cost of such a funeral. It is really incorrect to refer to this as prepaying the funeral since no funeral home got my money. It is an investment which is to be used against the funeral bill. It may be more or less than the cost of the funeral depending on several factors.
I forget the amount I invested but it would have covered an appropriate funeral at the time. Unfortunately the cost of such a funeral has increased at a rate faster than the increase in value of the annuity. This would mean that a funeral of the same level would require my estate to make up the difference. The funeral home is the agent with the annuity but the funds can be used by any funeral home.
There are some incentives to encourage going with such a plan. Any earnings on the annuity accumulate tax-free. If the total amount is used for the intended purpose of a funeral, I don't believe there would be any tax implications. If for some reason (seems unlikely) that the funeral costs are less than the accumulated value, the deceased's estate gets the excess but I believe taxes would then be involved on the excess.
These funds are protected from use in the case of financial distress. In common terms, this means that these funds would be protected from a rest home etc. This may seem morally wrong but it is protected.
I met with the local funeral home in January. This gave us a chance to discuss things. My goal is to make my departure as smooth as possible with little to no need for others to have to make some decisions. The value of my annuity had increased in the 20+ years that I have had it, but not enough to cover the increased cost of the funeral I had envisioned. My ideas on a funeral had changed during this time anyway.
Originally I had envisioned a traditional funeral with a service at the local church. The local church has disappeared and I have decided to go with direct cremation and a service at the local funeral home. This does reduce the total cost due to no casket and the preparation costs are reduced. A reduction in cost wasn't really my motivation but it seems rather frivolous to spend a lot of money on a fancy casket etc. It appears at this point that my original investment and growth in the annuity should about cover the expenses. Probably not for long though.
So is the idea of buying an annuity which is dedicated to funeral expenses a good idea? I don't know. Other investments would probably earn more, but with these plans the money is tucked away for the inevitable. Some might say, "Don't worry about it, they'll bury you". It is unlikely that you are of that persuasion if you've read this far.
I am also in the process of meeting with an estate planning lawyer to update my financial matters. I have had a plan and Will for some time but the situation has changed. This lawyer deals with estates involving transfer of farm land. In preparation for meeting with him they sent me various forms which forced me to dig out and organize various documents including agents, phone numbers, account numbers etc. I had all this in my fire vault but it would have been confusing for someone to sort it out after my passing.
Edited by tedbear 3/10/2019 12:13
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Prepaying & making payments on final expenses
