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    Should you have a pre-paid funeral plan for your parents (or yourself)?

    Advantages and Disadvantages of Prepaid Plans

    One way to plan in advance for the end of one’s life is to sign a formal contract called a “preneed funeral plan.” With this plan, money to pay for a funeral and/or burial is held in a trust, in an escrow account or paid through an insurance policy on the life of the person desiring the plan. Parts of or all of the funeral service and burial are designed in advance and pre-funded in advance and the family has little to do but show up.

    This type of planning has become very popular in recent years. A survey conducted by the AARP in 1999 found that two out of five people over age 50 had been approached to pre-purchase funerals and burial goods and services. An AARP survey in 1998 indicates that 32% of all Americans over age 50, roughly 21 million people, have prepaid some or all of their funeral and or burial expenses (but not necessarily through a formal preneed plan). Breaking that down; about 25% of the over age 50 population have prepaid for their burials (cemetery plot, mausoleum or niche), 18% have prepaid for headstones, urns, caskets, grave liners or vaults, opening and closing of graves and so on and 13% have prepaid for goods or services from a funeral home or funeral director. The same survey indicates that over $25 billion is being held in preneed trust funds. Roughly another $25 billion is waiting to be paid out in life insurance benefits. Prepaid or preneed funerals and burials are big business.

    Funerals and burials funded privately by the family, or paid from an individual life insurance policy and arranged informally through a funeral home or funeral director are generally not subject to state regulation. Any formal arrangement through a second party or involving a contract is subject to regulation in all states. Each state has adopted different rules as to who can sell these plans, what the plans can provide, what contract provisions must be, how the plan is to be funded and what recourse purchasers might have in the event of fraud or default. All states call these regulated plans “preneed” funeral and burial arrangements.

    Here are some advantages as to why one would want to buy a preneed plan for funeral and burial services and goods.

    • It provides peace of mind knowing these arrangements have been made in advance.
    • It avoids the burden on family members to make decisions when they are most vulnerable to manipulation.
    • It allows one to virtually control from the grave by determining in advance the funeral products, funeral services, burial products and burial services that one would prefer having for final arrangements.
    • It helps the family to avoid taking loans, arranging finance plans, raiding savings or selling assets to pay for a funeral and burial.
    • It guarantees (for many contracts) that if products and services currently purchased are not available in the future, equivalent substitutes will be provided at no additional cost.
    • It locks in guaranteed prices (available with some contracts) forever.
    • It allows for inflation in future costs (for those contracts that do not guarantee prices) by investing money in an interest-bearing account or buying life insurance that increases in value over time.
    • Depending on the contract, it may allow for transfer to another funeral home or for a partial or full refund.

    Unfortunately, there are also problems with prepaid, pre-planned final arrangements.

    • With some trust fund and insurance funding options, there may be no refund if someone wants to cancel the plan in the future.
    • If a purchaser moves to another state there may be no transfer options or there may be different rules governing the funding option.
    • In some contracts, interest earnings on investments resulting in excess money not needed for the plan may be retained by the funeral home or funeral director.
    • On installment plans, interest may be charged but not credited to the account.
    • In certain insurance-funded contracts, the ownership or death benefit may be irrevocably assigned to the contract holder (funeral home), preventing the purchaser from enjoying ownership rights in the policy.
    • In certain insurance funded contracts, a growth in the death benefit over time that exceeds the cost of the preneed plan services and goods may be pocketed by the contract holder (funeral home) instead of being refunded.
    • If the contract provider goes out of business or fails to secure 100% of the funds for future payment, there may be no recourse to get all of the money back that was put in.
    • If certain services or goods that were purchased initially are not available in the future, but more expensive versions might be, the family may be forced to pay extra for those items.
    • In certain insurance funded plans, if the insured dies too soon, there may have been a waiting period in which few or no benefits are paid at death, thus forcing the family to pay out of pocket for the funeral.
    • Certain unscrupulous providers may have failed to provide an itemized list of services and goods or failed to identify properly, specific services and goods, thus allowing the provider in the future to substitute less expensive items or to leave out services and goods that were originally anticipated in the agreement.

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    Reprinted from Bob Mauterstock’s The Gift of Communication Blog. Subscribe at http://www.GiftofCommunication.com  and receive Bob’s Family Meeting Checklist Guide.

    It’s Time to Talk Turkey With Your Aging Parents!

    Have you had a conversation with your parents regarding what they want to do if one of them needs extended care? Will they stay at home? Who will take care of them? I know it may be difficult to ask these difficult questions but the holidays may be good time to begin the conversation. You don’t want to wait until they have a medical crisis before you start planning. No one makes good decisions when they are under a lot of stress.

    So how do you begin the process? Here are my suggestions to get the ball rolling:

    Go to the website www.agingwithdignity.org

    Download a copy of the Five Wishes Document.

    Complete the document for yourself. It will force you to make a lot of decisions regarding how you want to be treated if you become critically ill.

    Sign the Five Wishes document and have two witnesses sign it. If you are in one of 42 states this now becomes a legal health care proxy and living will. (Check the website for those states where the form is not legal.)

    Make several copies of the document and save the original in a protected place.

    Share the document with your spouse and children and make sure they know where the original is.

    When you visit with your parents over the holidays share your completed Five Wishes document with them. Tell them what the experience was like filling it out.

    Leave blank copies of the Five Wishes for each of your parents and suggest that they might want to complete them.

    Check in with you parent a few weeks later to see if they have completed the forms. If not set up a time to review the forms with them and help them fill it out.

    This process is a painless way to open up the conversation regarding your parents’ wishes for their care. You don’t have to ask them the questions directly. The form provides you with the tools to gather the important information. You just ask your parents to read the questions on their own and answer them privately when they are ready. And the process of planning their future care has begun!

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    Financial Advisors may reprint any articles from The Gift of Communication Blog in your own print or electronic newsletter. But please include the following paragraph:

    Reprinted from Bob Mauterstock’s The Gift of Communication Blog. Subscribe at http://www.GiftofCommunication.com  and receive Bob’s Family Meeting Checklist Guide.

    9 Critical Steps to Protect Your Aging Parents

    After all of my years in the financial advisor industry and in dealing with elderly clients, I have come up with 9 critical steps to protect aging parents and/or clients.

    These steps are:

    1. Policy Review: Review all life insurance policies, annuities and IRA accounts to verify primary and contingent beneficiaries. List account numbers and contact information

    2. Durable Power of Attorney: Establish Durable Power of Attorney and name appropriate person to hold that power.

    3. Health Cary Proxy: Identify Health Care Proxy and describe extent of care desired through a living will. I suggest you use Five Wishes Form from www.agingwithdignity.org

    4. Long-Term Care Plan: Discuss long term care plan with parents.

    5. Trust Agreements: Review will and any trust agreements to determine if still relevant and confirm who executor/executrix and trustee is.

    6. Financial Accounts: List all bank and investment accounts, identifying account numbers and who the legal account holder is.

    7. Internet-based Accounts: Identify all internet based accounts, listing web address, user name and password. List beneficiary for each account.

    8. Key Professional Contacts: Identify all key professional contacts including, attorney, financial adviser, accountant, banker and spiritual adviser. Note desired contact information.

    9. Maintaining Records: Maintain a record of where all the above forms, documents and information are stored. I suggest using either a three-ring notebook or a web-based Dropbox for storage. Make sure your spouse and children know the location of these records.

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    Financial Advisors may reprint any articles from The Gift of Communication Blog in your own print or electronic newsletter. But please include the following paragraph:

    Reprinted from Bob Mauterstock’s The Gift of Communication Blog. Subscribe at http://www.GiftofCommunication.com  and receive Bob’s Family Meeting Checklist Guide.

    Caring for your elderly parents, are you doing it?

    It’s a fairly universal assumption that at some point we’re going to have to think about how to look after our parents when they get to an age when they’re less independent than they want to be. When that time comes, we have to consider the options against the time we have available to give them and the cost implications of an increase in service or utilities.

    Here are some of the ways we can make sure we’re all doing the best we can for our family and other elderly people we know.

    Time

    Giving your time to your elderly family is priceless when trying to make sure they get the best life possible. In the not-so-distant past, and in many other cultures, it’s expected that elderly men and women would live with their children or younger relatives when they are no longer capable of living independently. This is fantastic for keeping a family together, but it’s simply impossible for some young families to dedicate that much time if they are both working and have lots of commitments- consider that, when this was popular in the past, it was generally accepted that women would stay at home while men worked- alternatives must be used, even if they don’t necessarily want to use them.

    Money

    If the financial responsibility may fall on the younger members of the family and if that’s the case then private carers and expensive retirement homes may not be feasible. If this is an issue for you then check what kind of organizations are offering the retirement homes to give you a clue on what price and quality of services they will provide. Some charitable trusts offer residential ‘communities’ that focus on building an active and friendly environment for the elderly, and have the charitable status to back them up. These offer fairly reasonable prices and ensure that time and attention will be given where it’s needed, which is great if the problem is a lack of ability to spend time with the older family.

    What sorts of things are available in retirement communities?

    As these retirement villages are focused on activities and building communities, there is generally a lot to do in them. More conventional things like book clubs are obvious, but there are also more contemporary activities such as tai chi, and if people aren’t quite up to speed with IT skills like email and Microsoft Office programs, there are plenty of classes to help there too.

    Make sure they’re happy about where they’re going

    Everyone is aware of the negative connotations surrounding some of the more dingy retirement homes, so your elderly family will obviously be included in that. Retirement villages, especially when run by charities dispel those worries, by having an already bustling community that people can see and reference to, meaning that if you really can’t afford the time or money to have your family at home with you, they are by far the best options available.

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    PERMISSION TO REPRINT:
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    Financial Advisors may reprint any articles from The Gift of Communication Blog in your own print or electronic newsletter. But please include the following paragraph:

    Reprinted from Bob Mauterstock’s The Gift of Communication Blog. Subscribe at http://www.GiftofCommunication.com  and receive Bob’s Family Meeting Checklist Guide.

    What will you do with all your stuff?

    One of the greatest concerns I have noted among older couples is, “What will happen to all our stuff when we are gone?” I can remember having a family meeting with a couple in their 70s and their four adult children and noticed that mom was getting very anxious. At first I thought her anxiety was due to the fact that she was preparing to discuss her end of life planning with her children.

    But when I asked her what her concern was, she responded, “I don’t know what I am going to do with all my stuff! I have several beautiful collections and I don’t want my children fighting over the objects right after my funeral or just putting them out in the yard for a giant garage sale!”

    She admitted to me that she hadn’t slept for several nights thinking about this terrible possibility. She confided in me that her husband still wasn’t talking to his sister after 20 years because she had raided the house when their parents died and taken everything of value before he had even arrived. “I don’t want that happening in my family!” she proclaimed.

    So what did we do? I asked her to describe her valuable collections to her children at the family meeting. She then created a list of all the items and asked each child to review them. If they wanted an item they were asked to put their name next to it. If more than one wanted something, they both listed their names next to it and mom would decide who got it.

    Mom collected the lists after the family meeting, reviewed them over the next few weeks and then reported to her children who would get what. No one disputed her decisions. After all, the collections were hers and she could give them to charity if she chose. The next time I talked to her I noticed her anxiety level was significantly less. She told me that for the first time in a long time she was sleeping very soundly.

    If you are a parent, don’t do your children a disservice. Don’t leave it up to them to decide what to do with your stuff after you are gone. The loveliest relationships are often spoiled by siblings fighting over the silver forks. Meet with your children and tell them what you intend to do. If you are an adult child, strongly suggest to your parents that they follow the procedure my client did. It will save much grief and anxiety for the whole family.

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    PERMISSION TO REPRINT:
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    Financial Advisors may reprint any articles from The Gift of Communication Blog in your own print or electronic newsletter. But please include the following paragraph:

    Reprinted from Bob Mauterstock’s The Gift of Communication Blog. Subscribe at http://www.GiftofCommunication.com  and receive Bob’s Family Meeting Checklist Guide.