It's Your Money  

Planning for final expense

None of us are exempt from death, but there are things you can do now to make this difficult time a little bit easier for your loved ones.

One step you can take is to ensure that there will be adequate and immediately accessible funds available to cover your final expenses.

So how much do you really need?

Funeral and burial costs can vary quite a bit, but a good estimate is around $10,000. Depending on the complexity of your estate, you may need to add on additional funds for lawyer and accountant fees.

Additional funds may also be required to cover unpaid debts, bills or taxes due upon your executor filing your final tax return. 

Everybody’s situation is different and it’s important to put together a projection that’s tailored to you.

When creating your estate plan, you may also want to provide funds specifically for charitable bequests and/or gifts to your children or grandchildren. Sometimes it will make sense to include this with your final expense planning strategy.

Although you may have plans to divide your estate among your children, and there will be plenty of money there to cover these costs, the beneficiaries often won’t receive any of these funds until the probate process is completed. This often takes six months (or more) and your children will be left to cover the costs during that time. 

What’s the best way to fund these requirements?

One method is to place the necessary amount of money (preferably non-registered) into a segregated fund account. You can name the person responsible for these final expenses as the beneficiary of this account and they will receive the funds immediately.

If the remainder of the estate is to be split equally, it’s a good idea to make note of this plan in your will so that this isn’t counted as a part of someone’s share.

A second and generally much cheaper option is to set up a life insurance policy to provide the required amounts. This can be done as part of a larger insurance plan you already have in force or it could be set up as a separate policy.

Although we often recommend term insurance for the lower costs, this is one time where term doesn’t work. If the insurance policy is meant to provide for final expenses, you need to make sure that it will still be in force.

If you decide to go the insurance route, make sure that you don’t fall for one of the television ads that offer “guaranteed acceptance life insurance.”

These policies are sold at anywhere from two to four times the going rates for insurance and they often won’t pay out at all if you pass away in the first few years. These commercials offer misleading information and are designed to confuse the average consumer.

If due to health or other reasons you don’t qualify for any other type of insurance, this type of coverage may be a reasonable option, but they should not be your first choice.

The third option makes the least sense financially but can offer some simplicity to a situation. You can consider pre-paying some of your final expenses directly with a funeral home, but it will cost you to do so.  

Whatever option you choose, make sure that you take the time to clearly spell out your wishes so that your loved ones aren’t left guessing. Create a document labelled “my preferred funeral plans” and leave it with each copy of your will. 

So, when that difficult time does finally come, a bit of planning now can go along way to make sure your affairs are handled in the fashion that you prefer with minimal stress or burden on your family.


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About the Author

Brett, designated as a chartered investment manager and certified financial planner, is the regional director (Okanagan) for IG Wealth Management.

In addition to his “day job," Brett was appointed to the board of directors of FP Canada (formerly FPSC) in 2014, named as the board’s vice-chair in 2017 and took over as board chairman in 2019. 

Brett has been writing a weekly financial planning column since 2012 and provides his readers with easy to understand explanations of the complex financial challenges that they face in every stage of life.

Enhancing the financial literacy of Canadian consumers is a top priority of Brett’s and his ongoing efforts as a finance writer and on the regulatory side through the FP Canada board focus on this initiative.   

Please let Brett know if you have any topics that you’d like him to cover in future columns by emailing him at [email protected]

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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