Final Expenses:

An initial financial problem the family must solve involves cash to pay the deceased’s final expenses. Many of these expenses come due immediately, others soon after the funeral. They usually include:

• Debts incurred from the final illness and subsequent death;
• The deceased’s other debts which would have existed even if he or she had lived and which would have been paid out of regular income.

Available Plans:

• Whole Life IV (now with rates)
• Whole Life Two Year Graded

All the bills accumulated from the deceased’s final illness, and not covered by medical insurance, must be paid. Such bills often include expenses for an ambulance, the attending physicians’ fees, nursing care costs and hospital fees, including daily room and board, medicines, and often operating room costs and the anesthetist’s fee. Such expenses can run into thousands of dollars even for a short stay in the hospital.

These expenses usually include the fees for the funeral director’s services, the casket, the burial plot, opening and closing of the grave, and the cemetery monument.

If there is an eligible surviving spouse or child, Social Security may provide a very small - only $255 – lump-sum death benefit. However, this is usually of little help since funeral and burial expenses have increased in most parts of the country and can often run from $5,000 to $10,000 or much more.

The amount of state inheritance and estate taxes to be paid varies with each estate. Paying these taxes may present a great problem in the case of a small estate. If an estate is subject to the federal estate tax it will be taxed at a marginal rate of between 37% and 55%. Estate taxes generally must be paid within nine months of death.

The expenses in settling the deceased’s estate will vary with the individual estate; however, according to IRS statistics, administration expenses average 4% to 5% of the typical estate. These costs can include the following:

• Administration expenses (costs of opening, administering and closing the decendent’s estate)
• Executor’s fees
• Executor’s attorney’s fees
• Court costs
• Costs of appraising estate property
• Costs of insuring estate property while the estate is open
• Maintenance or repair of estate property, particularly if it is to be sold
• Auctioneer’s fees if estate assets must be auctioned off

The last two types of expenses may occur if real estate must be sold and personal property auctioned off to provide cash to pay taxes and other immediate expenses, or funds for the survivors’ needs.

Any accrued taxes are considered to be debts of the decendent and must be paid. This would include accrued but unpaid income taxes (federal, state and local), property taxes and any other taxes which the decedent has incurred but had not paid.

The amount of debts decedents leave also varies, of course. However, debts typically average 5% to 6% of the total estate.

A mortgage is often the most significant indebtedness. While the mortgage balance may not have to be off at the breadwinner’s death, the family may not be able to carry the burden of this large, ongoing obligation.

Other typical debts of the deceased that must be paid include:

• Automobile loan balance
• Credit card accounts
• Installment loans

All of these expenses and debts can create a difficult problem for the survivors if the deceased breadwinner did nothing in advance to resolve them. They must be paid, but to do so it may be necessary for the family to use funds that were intended for the family’s living expenses.

The final expense needs require immediate cash so payment can be made as soon as possible. In addition, the surviving family has some very important needs for regular income.