Many people, when they think about planning their estates, think that means dividing their wealth among their loved ones and/or favorite charities. This is one of the most important things that your estate plan will do, but it doesn't have to be the only thing. A comprehensive plan can help you to make sure that your loved ones are protected in another way, as comprehensive planning can give your loved ones needed liquidity in order to pay the final expenses that your estate will owe.
Planning for the resolution of your final affairs and expenses should have two components to it. On one side, you can take a lot of the guesswork out of the final arrangements process, and give your loved ones peace-of-mind, by creating as part of your estate plan a written record of your preferences and desires regarding your funeral. Do you want to be cremated? Do you want to be buried somewhere and, if so, where? Do you want a funeral and, if you do, whom do you want to speak and what music would you like to play? These are but some of the pieces of important information you can impart in the funeral planning portion of your plan. The more details you can give your loved ones, the less guesswork they'll have. Some states even have recognized legal documents that you can create (with names like “Funeral Planning Directive”) where you can state all of your intentions and desires about you funeral and related arrangements.
Another way to plan to ensure liquidity is through another form of insurance to deal with funeral and final expenses. These funeral and final expense costs can be substantial and, for many people, their estate may not have the liquid assets to deal with them readily. Insurance products like final expense insurance or irrevocable funeral trusts can give you peace-of-mind when it comes to knowing that there will be funds to deal with these costs. Many funeral trust products are “guaranteed issue” with “no underwriting,” which means that you can obtain these products regardless of your health and count on those funds being there when your family needs them.
You also should plan for dealing with final financial matters. Many people overlook this aspect and may not have enough cash flow at their death, leaving problems for their loved ones when it comes to paying bills. Even if you don't owe federal estate taxes upon your death, there will still be bills, whether they are final medical bills or just other debts you owe. Your successor trustee of your living trust or the executor of your estate will have to pay for the taxes, utilities and upkeep on your home. If you have any dependents, your estate or trust will have to pay for their needs. Additionally, there's also your funeral itself.
There are several ways to make sure that you've planned to create the liquidity your loved ones will need. Life insurance can be a very useful part of your estate planning in this regard. Proper planning with life insurance can mean that your loved ones will have the money they need to pay bills, pay taxes and maintain upkeep on your assets requiring maintenance.