With the average cost of a funeral in Colorado now topping $6,500, one estate planning task that has become crucial is providing a means to pay funeral expenses within your estate plan. There are several ways to address funeral expenses:

1. Life insurance policies

A life insurance policy can provide cash to an estate to pay immediate expenses such as funeral costs. There are several options in using a life insurance policy, such as making your estate the beneficiary of the policy, so make sure to work with an estate planning attorney to find out which method fits best with your estate plan and family’s needs.

2. Pay on death accounts

Pay on death accounts, also called Totten trusts, are available at most banks and credit unions. All you have to do is fill out a form in which you name an account beneficiary. Upon your passing, the money can be claimed by the named beneficiary. Many choose to name their spouse as the beneficiary with the understanding that the funds in the account should be used to pay funeral expenses.

3. Living trusts

The typical living trust would involve the person signing a trust agreement appointing himself, as trustee. He (or she) would then transfer ownership of property to the living trust. The trust agreement would provide that he could use this property in any way he saw fit, and he could amend the terms of the trust or revoke the trust during his lifetime. Upon his death, the trust agreement would designate a successor trustee, such as a surviving spouse or child, to manage the trust. The trust agreement would allow the successor trustee to pay the funeral expenses, debt, and estate taxes, and would require the trustee to distribute the balance of the property as provided by the trust agreement.

Also, be aware that life insurance does not pay out until a death certificate has been issued, which may take several weeks after your death. In the meantime someone will have had to pay for your cremation or burial and funeral expenses. A prepaid funeral plan addresses this problem, but is tied to one particular company so if that company is no longer around (or you have moved) you may lose your investment. A Funeral Trust is a free vehicle that you can use to make money available within 24 hours of your death, good with any company in any state. If this is a concern for you, check it out!

The Hammond Law Group is a member of the American Academy of Estate Planning Attorneys.

With the cost of an average funeral topping $7,000, it is important to address both the expense and service preferences while preparing an estate plan. It is best to do this within a letter to your loved ones that can be easily located upon your passing, as wills are not often located nor read until after the burial. Discuss these plans and the location of the letter with your loved ones and estate executor. Within the letter, make sure to address:

• Your wishes involving cremation or burial;
• The location of the service;
• The type and size of service;
• Casket preferences (open vs. closed);
• Pallbearers;
• Music preferences;
• Flowers or donations requests.

Some choose to even write their own obituary or provide details that they would like included, even the photograph they would like used.

Providing these details will ensure that your wishes are carried out, as well as save your family from having to make these difficult decisions during a time of grief. While these letters are not typically legally binding documents, they do provide guidance and clarify your wishes to your loved ones.

As for planning for your funeral expense, many incorrectly assume that social security benefits cover the cost of burials. Social security provides only a one-time payment of $255 paid to a surviving spouse. If there is no surviving spouse, the payment is made to a child who is eligible for benefits at that time. Obviously, this benefit will not fully cover the cost, so additional financial planning is needed.

Many choose to set aside the cost of a funeral in a ‘payable upon death’ account, also known as a totten trust. Others choose to prepay their funeral expenses, which is not recommended – consider the consequences should you choose to relocate or the company goes out of business. There is also a newer tool called the Funeral Trust, which allows you to set aside money to be used for burial and funeral expenses, but the money can be used to pay expenses with any company rather than being tied to one specific mortuary or funeral home.

Taking the time now to document your wishes and plan for the expense of a funeral or other memorial service can both ensure that your wishes are carried out and provide tremendous relief for your loved ones. It is just one more reason to have a comprehensive estate plan to ease the burden of your passing.

The Hammond Law Group is a member of the American Academy of Estate Planning Attorneys.