This is becoming
an increasing dilemma today with funeral trust funds not always delivering,
and the economy in such a dire state that so many are feeling the effects.
Today more families are finding themselves dealing with something near
a crisis when a family member dies without a funeral plan or any money
to pay for a funeral. So we are often asked the question – what is
the best and safest way that I can secure funds to pay for my funeral?
| Prepaying
with a funeral plan
The funeral industry has
been selling pre-need funeral contracts for many years. Whilst a
preneed contract can appear to secure your funeral needs and seem to provide
an opportunity to ‘lock-in’ to current funeral prices, there are still
risks with a funeral plan. There is legislation and licensing that
governs preneed funeral plans, but this varies state by state, affecting
how monies are refundable or transferable.
If you are pre-paying because
you are required to have a funeral plan to qualify for nursing home care,
then this is |
|
the way to go. Many nursing
homes now require a patient to have a funeral plan before they will admit
them. And up to $6,000 placed into a funeral plan is discounted if
you are assessed for Medicaid at a later date.
Laying aside the money
in a Payable on Death (POD) account
This is a safe and reliable
way to make sure your family have the funds to pay for funeral expenses.
The best way to alleviate some of the stress for your surviving family
is to discuss with them your funeral wishes, and put some money aside in
a payable-on-death account. A payable on death (POD) account simply
means that you name a beneficiary in the family who can immediately access
these funds. Your family will not have to wait for probate.
A payable on death account
is also referred to as a Totten Trust (ITF), Transfer on Death (TOD) or
a Revocable Pay on Death (POD).
How do I set up a POD
account?
You will need to arrange
to visit your bank, or the bank you have selected to open a POD account
at. You can also arrange to make a certificate of Deposit (CD) for
a sufficient amount to cover your proposed funeral expenses. You
may also wish to place some extra funds in the account to assist family
with covering any other expenses. You will need to provide the necessary
ID, and name the beneficiary who may access the funds.
What needs to be done
to keep the account in good standing?
Each state has its own rules
about the activity on a POD account and the frequency of any withdrawals
or deposits. You should carefully check the rules with your bank
to ensure the account does not fall into a dormant state. It can
be difficult to restore a dormant account. There should be no dormancy
rules with a CD account. You will need to pay any taxes associated
with the account, although these should be minimal, and you will receive
any interest accrued.
You may wish to revisit your
funeral preferences from time to time to ensure that the funds you have
put aside will still adequately cover your requirements.
 |
Who should
be named as a beneficiary?
It is wise to name someone
in your family whom you trust to administer the account. You may
wish to name the executor of your will, a power of attorney or even a health
care agent. It is recommended not to name your funeral director as
a beneficiary. Some banks allow you to name 2 beneficiaries, which
can be a good idea, and any funds are split 50/50. It can be advisable
to ensure that more than one person can access the funds. It can
also be a backup strategy in case one person is unable |
to act or dies.
How do I ensure that
family knows about my POD account and my funeral plans?
Once you have set everything
up you need to communicate what you have done to your family, attorney,
and executor of your will. It is no good having been so careful and
set these plans in place, if your family does not find out about them until
too late. It is not uncommon for us to hear about families who have
already arranged a funeral, and even laid out monies, before they discover
that the deceased had a plan/fund in place.
Talk to your family, tell
them what you have organized. Write down your funeral wishes and
the information about your POD account. Keep it safe but somewhere
where your family can easily access it when the need arises. If you
have a will, ensure the details of the money you have set aside for your
funeral is clearly detailed.
Taking the time to prepare
your affairs, decide upon your funeral preferences and set aside the funds,
can significantly save surviving family from the emotional and financial
burden. Just eliminating much of the difficult decision-making process
can help families get through those first initial days following a death.
Having funds set aside that they can immediately access, can make arranging
a funeral so much less stressful. |
