It Costs Big Bucks To Die
I recently had a client who hired me to settle her mom’s estate. She cried in disbelief when she realized how expensive everything was. It costs a lot to die!
Read on to learn how to prevent this same reaction from your daughter when it’s your turn to go.
When we think of preplanning in advance, most families think of paying for their funeral. It’s often unknown that in addition to the hefty funeral bill, there are incidental costs like flowers, the wake, and the headstone. But what about from the legal aspect?
On average attorneys charge 5% of the value of your estate when you die. So that’s all the assets that are in only your name: your house, bank accounts & investments.
So, what if you have a $300,000 house? Does that mean some attorney is going to get $15,000 just to settle your home? More than likely.
So you can see how expensive it adds up to between the cost of the funeral & miscellaneous expenses, any debts you passed away with, medical bills , attorney fees…… they all add up, so what’s left is for your family, right?
What’s typically forgotten about are the taxes. Here in Pennsylvania, we have inheritance tax that ranges from 0 to 15% of your estate with the exception of insurance. No big deal if your spouse inherits it all but children pay 4.5%, Siblings pay 12% and everyone else – nieces, nephews & neighbors will pay 15%.
To add insult to the injury, what if you pass away with a retirement account?
Naturally, I hope you have named a beneficiary so this asset avoids the court probate process. But don’t forget to factor in income tax as well. So that’s another 10 – 40%.
I asked my parents once if they thought my brother & I would prefer to inherit a million dollar IRA account or an $850,000 life insurance policy. Sure, the IRA may have a higher value but after you factor in the inheritance tax and income tax we’ll actually end up with less than the tax free insurance.
Now I’m not telling you to stop contributing to your IRA, but there are tools available to help reduce, if not completely eliminate, these extra costs upon your passing. With some conscientious planning we have the ability to recognize the consequences and do something about them now.
Before it’s too late.
Let me help you allow your passing to be a momentous occasion, not a financial burden.