Two of my closest friends’ mother passed away recently. This was not a sudden death as she had been sick for sometime. My friend and her sister contacted me when they became aware of their mother’s illness, an illness that would lead to death. My friends contacted me to review their mother’s retirement and health care documents to ensure that they understood what their mother was entitled to and what money could be used to finance her care upon her leaving her job.
My friends’ mother had everything taken care of in my opinion. She actually reminded me of me and my future. She had a retirement plan, had her health insurance matters in order and even planned out her own funeral including being cremated and having her ashes spread over her parents’ graves.
I am certain most people don’t prepare for their death while in life and while I am certain my friends’ mother did not do a lot of earlier acts (saving for her retirement) because she would pass one day, the fact that she made a cushion for herself substantially eased any financial burden that could have been placed upon her two daughters.
To financially prepare for your death during life, you should consider the following:
1. Funding Your Retirement Plan: Ensure that you are and have contributed to your retirement plan. If your employer does not offer a retirement plan, you can open one at a company such as Fidelity Investments, Vanguard, etc. Your retirement plan will be a factor in properly planning for your death during life. There will be a time when you will not want to work or cannot work so it is best for you to save as much as you can while you are able to work.
2. Check Your Employer’s Health Insurance Plan Document: I believe that it is getting less likely that people spend 30 plus years at an employer, however, it is still worthwhile to review your company’s plan document to determine what, if any, retiree health benefits you may be entitled to. Employers who have retiree health insurance benefits for its employees help to reduce the out-of-pocket costs of healthcare for its former employees. For those who do not have retiree health insurance, there is currently the opportunity to purchase health insurance on the open market under the Affordable Care Act.
3. Long Term Care Insurance: Long Term Care Insurance is used in the event a person may have to be placed into a nursing home, provided with assisted living, or may need in home assistance at some point. Employer based health care coverage will not pay for such services and Medicare will only cover a short stay in a nursing home or a limited amount of at-home care, but only under certain circumstances.
4. Medicare: Medicare is the federal health insurance program for people who are 65 or older, certain young people with disabilities, and people with End Stage Renal Disease. Medicare has four parts, Part A (hospital insurance); Part B (medical insurance); Part C (Medicare Advantage Plans); Part D (Prescription Drug Coverage).
5. Life Insurance Policies: If you do not have a life insurance policy, strongly consider getting one even if you are single with no children. The rule has been that if you are single and you have no dependents you do not need to get one but I believe that you should still get a life insurance policy if for nothing else, to leave some kind of legacy behind. First, if you have parents, you can always leave them as the beneficiary of your life insurance policy and if you are an aunt or uncle, you may want to consider leaving your nieces or nephews as beneficiaries to your life insurance policy. Also, please ensure that your designated beneficiaries are aware of the life insurance policy. You do not have to fear your life and feel like someone is going to kill you to get the money (I clearly watch too much crime t.v.). If you are concerned about that, then you can tell a trusted person about the policy and to not disclose that a policy has been obtained until after you die. Also, if you are married and/or have children, then you should ABSOLUTELY have a life insurance policy independent of what you may have through your employer. The life insurance policy proceeds can be used to pay off the mortgage on a home, a child’s college education and any other day-to-day expenses that may not be covered due to that policy holder’s death.
6. Transfer of assets in life: Try to transfer your assets to your beneficiaries/family members while in life so they will not have to pay taxes on the transfer of any assets.
Most people never want to think about dying but all of us have to die at some point in time. Also, some of the items that I discussed such as retirement savings are not necessarily planning tools in the event of a death but it can be very useful in ensuring that you are not broke prior to dying or that your failure to plan does not negatively impact a loved one’s finances.