No matter your age, you should make arrangements for the day when you can no longer communicate your decisions to loved ones.
While these are difficult topics to face, proper end-of-life planning can help your family if you face a major health crisis or when you die, especially if you haven’t focused any of your planning on your finances.
Here are some steps you can take to prepare your finances before you reach end-of-life.
The Five Elements of End-Of-Life Planning
Estate planning is difficult to consider. However, addressing these five key elements will make the task easier:
1. Preparing Your Will
A will is more than just a document that helps rich people distribute their wealth. It can ease your family’s burdens after you pass even if you’re single and have no dependents.
Anyone who has assets and/or dependents should create a will to help their family assign money, property, and any other assets exactly where they want.
If you have kids under age 18, you can designate a legal guardian for their care in your will.
You can make an online will that is easy and legally-binding.
Whether you’re married or divorced, this is a discussion you should have with your child’s other parent. You must also discuss this with your chosen guardian to make sure they will accept the responsibility.
2. Making Funeral Arrangements
According to the National Funeral Directors Association, the median cost of a funeral and burial in 2019 was $7,640. That figure drops to $5,150 with cremation or rises to over $9,000 if you plan on using a family vault. It’s also likely that these prices have gone up.
Without proper planning, your loved ones will need to foot this bill themselves, with no idea of what arrangements you prefer. You can start saving now for these costs and select a beneficiary who receives these funds once you pass. You can also invest in burial insurance.
3. Organizing Your Important Records
It’s important to make sure that your family knows in advance where they can find important documentation.
Keeping paperwork such as your will, birth and marriage certificates, car title(s), and other legal documents in one place will help your family prepare your estate.
Financial records such as credit or loan paperwork, investments, bank data, and safe deposit box information should be part of this package too.
4. Sharing End-of-Life Decisions With Others
We’ve already discussed guardianship and helping your family find your records. However, there are other end-of-life decisions you should discuss with others.
For example, talk to your doctor about advanced care planning for a potential medical crisis.
He or she can guide your choices, such as a “Do Not Resuscitate” order or your wishes about ventilators and feeding tubes. You may want to hire a lawyer to create a living will in case you are unable to communicate your wishes due to medical issues.
Other decisions to be discussed with your doctor, lawyer, and your family include comfort or hospice care options and power of attorney for medical decisions. You may also want to plan for organ donation.
5. Purchasing Life Insurance
Life insurance can give your family a certain level of financial protection that budgeting cannot. There are two types:term and whole life insurance, which provide money to help your spouse and children after you die. They are different in cost and purpose and either or both can be part of your investment.
- Term life insurance is the most cost-effective but costs less when you are younger. This type covers you only for a “term,” i.e., 20 years. Typically, this is the sort of insurance that companies offer their employees.
- Whole life insurance is more expensive and does not expire like term insurance. Some people use it as an investment, but it does not have a good return.
Bestow offers no-exam term life insurance. You can get term coverage in minutes if you qualify. You can get a free quote to compare your life insurance options.
Estate Planning: Myths and Reality
Some people postpone estate planning indefinitely because of common misconceptions. They think that you need to be wealthy to plan an estate.
However, as we have seen, end-of-life planning is really more about helping your loved ones manage a difficult time and protecting your wishes for your assets.
Another issue is that people do not like to think about their mortality. Young people who are new to the workforce and those with no family history of health problems often delay planning.
Unfortunately, an unexpected health crisis can happen to anyone at any time. Preparing your finances now is a smart move for every working adult.
Planning for Retirement
If all this sounds overwhelming, it doesn’t have to be. End-of-life finances can be a component of retirement planning.
A retirement fund plan is something everyone can invest in to ease the burden of these expenses.
Many companies offer retirement plans and 401Ks for their employees and some even match employee contributions.
However, if this is not available to you, you can save for your retirement in other ways. These options include a self-directed IRA and a SEP or Solo 401K if you are self-employed.
Saving Money for Your Future
Finally, you can take it upon yourself to save money now for end-of-life expenses.
If your finances are tight, now there are several ways that you can achieve financial freedom in a few short months to ease future income burdens, including:
- Eliminating your debts
- Sticking to a monthly budget
- Investing wisely
You may even want to downsize your home if you have enough equity. Try to save on home construction costs if you need to upgrade before selling.
Preparing your financial future helps your family focus on important details rather than forcing them to make critical decisions when you are unable to help. End-of-life planning is a great way to show your loved ones how much you care about them.
Dan Matthews is a freelance writer with a penchant for financial wisdom and solid research. You can find him on Twitter @danielmatthews0 and LinkedIn.
Josh founded Money Buffalo in 2015 to help people get out of debt and make smart financial decisions. He is currently a full-time personal finance writer with work featured in Forbes Advisor, Fox Business, and Credible.