Last Week’s Question of the Week: What are the three long-term capital gains brackets in 2018? ANSWER: For the 2018 tax year, they’re the same as 2017: 0%, 15% and 20%.
HOST: Today you are talking about planning for retirement and beyond. I know in your retirement planning with clients you cover a wide area of topics which are very important, so I suppose planning for the “beyond” is also important?
KLAAS FINANCIAL: Yes, we spend so much time planning for what our retirement income is going to look like, sometimes many of us don’t want to look at the whole picture because it makes us all uncomfortable to realize that we are indeed mortal. But, it is a fact, and so we would recommend that everyone should have completed their estate plans which include wills, trust, POA’s. It is a really good idea to leave behind written instructions for our financial lives and also our disposition. So, making your final arrangements in terms of funeral plans is important.
Some facts:
- According to the Center for Disease Control & Prevention which looked at Life expectancy for the U.S. population in 2016: the average expectancy was 78.6 years.
- For males, life expectancy was 76.1 in 2016.
- For females, life expectancy was 81.1.
- Interesting fact: in 2017, 2.7 million people died in the United States.
Several benefits to planning in advance:
- The peace of mind that comes with knowing your wishes have been made known and the details taken care of.
- The comfort of knowing your family will not have to make funeral arrangement decisions during the difficult time of their initial grief.
- Assurance that informed, thoughtful decisions have been made about the funeral home provider, choice of service and costs.
- As part of your estate planning, we would suggest that you complete in writing your wishes on how you wish to be either buried, cremated, celebrated etc.
Why do this in advance? Example of 2nd marriages, children coming forward to have mom or dad buried? Perhaps, not their final wishes.
Other questions to ask: Do you wish to donate your body to science? Do you want to have your ashes scattered? Do you wish to be returned to your birthplace? Do you wish to be buried next to a relative? Ideally, we would suggest that you complete this plan with your local funeral home or other place of final internment.
HOST: Can you give us an idea of what it generally costs for various types of services?
KLAAS FINANCIAL:
Great question. We have looked at national averages provided by the National Funeral Directors Association.”
- Trends: there are now more cremations vs. burials performed across the country. Religions that previously frowned upon it are now understanding its value. People need to understand that today, cremations often include visitations or funeral services.
- The NFDA (National Funeral Directors Association) released its 2018 Cremation & Burial Report. In 2017, they reported that 48% of all deaths in the United States were cremated, and looking at 2018 they are estimating that rate will be as high as 53.5%; they estimate that by 2035 the cremation rate will be almost 80%.
- According to the (NFDA) the average costs of a burial funeral in 2017 were $8,755 (including a vault but not cemetery plot fees). It all depends on the details. Whereas cremations averaged around $6,000.
HOST: What is the best way to pay for funerals? How can we prepare for this?
KLAAS FINANCIAL: Well, there are numerous ways. Many of our clients have JT checking or savings accounts with their children to pay for expenses directly from this. This may be a POD type of account, a CD or other type of investment.
Be careful when you look how liquid these vehicles are, because the funeral home may want their money quickly. Other people have retained a whole life insurance policy of $10k or more to cover expenses.
Trusts may be used to prefund funerals. Depending on the type of the trust, it may be managed by a funeral home, a cemetery, a bank etc. NOTE: A funeral trust may or MAY NOT be guaranteed to keep up with inflation for a specified period of time. With a guaranteed, fully funded trust there is generally not a balance due at the time of death. Discuss this with a funeral provider.
HOST: What about purchasing life insurance from the funeral home?
KLAAS FINANCIAL: Yes, you can do this as you plan for your final expenses. You would be purchasing a form of whole life insurance known as pre-need life insurance. These products may be used to prefund funerals in most states in accordance with state laws.
This is a specialized insurance policy that has growth value, meaning that the face amount or death benefit will increase over time to pay for funeral costs at time of death. Preneed insurance may be paid by a one-time cash premium with no further premiums due for the term of the contract, or by installment. Policy growth and the payout amount are not taxable to the purchaser. If you are unclear about your preneed insurance protection, discuss your state’s preneed laws with the funeral provider or a state regulator. State laws vary.
Our final word on this is just have a plan in place. As we all know, it is not a question of IF but rather WHEN…
Catch C.J. Klaas and Maleeah Cuevas on Money in Motion every Thursday on Madison's 1310 WIBA from 8:05-8:35am.
