6 After Death Expenses And The Best Ways To Prepare For Them Financially

6 After Death Expenses And The Best Ways To Prepare For Them Financially  Death is inevitable... and actually very costly!   But for most of us, there is no discussion about the topic - let alone any sort of preparation.
Death is inevitable... and actually very costly!

It causes such a big financial hit that it should be one of the most discussed expenses on par with tuition, food, and gasoline.

However, the opposite is true. For most of us, there is no discussion about the topic - let alone any sort of preparation. It's very understandable; our mortality - or that of our loved ones' - just isn't a nice topic.

It's a bit of a shame though, because most of the ways to prepare for this eventuality don't actually conjure images of death. For the most part, it's just more of the same: emergency funds and insurance.

But to ease the discussion, let's pretend a stranger we don't know passed away at the young age of 101 from natural causes. What expenses could this person expect?

Hospital Bills

What: Well, this one's pretty obvious...

How to pay: Via health insurance and Philhealth, if covered. If not (or only partly covered): cash or check; some may accept credit cards.

Best way to prepare: Have health insurance and an emergency fund.

(Due to the estate tax, we'll notice later on that the emergency fund must either be in cash and not in a bank, or in a bank but distributed into at least two single-ownership accounts - at least one of which is not the deceased's)

Death certificate

What: It's not enough that they died, it's gotta be certified ;)

How to pay:
With cash (possibly via check or credit card, but I'm not sure), at the hospital or mortuary (funeraria).

In the Metro Manila area, it will be taken care of by the hospital before they release the body. In the provinces, the heirs may have to process this themselves, though someone will surely be able to tell them how to do it.

In certain cases, the deceased may not have passed through the hospital and instead went to the mortuary directly. In these cases, the mortuary is also capable of processing the certificate.

Best way to prepare:
Have an emergency fund - that is not in the deceased's name, as those assets are frozen until the estate tax is paid.

Or have life insurance, the proceeds of which are estate-tax-free, released quickly, and can be used as needed.

Funeral Expenses

What: For the casket or urn, memorial lots or vault space, the chapel or place where the wake will be held, embalming, mortician service, outfit, etc.

How: Most likely cash. Maybe via check; some may accept credit cards but I'm not sure.

Best way to prepare:
Payments for these can be sourced from an emergency fund (again, not in the deceased's name), life insurance proceeds, or even a memorial plan (sometimes called a life plan) if the deceased had one.

Memorial plans are sold by pre-need or insurance companies, just be sure that:
  • the company is licensed by the insurance commission 
  • and the mortuary you will end up using honors that plan.

Wake expenses

What: snacks and drinks to serve at the funeral

How: Usually cash, possibly credit card, but most probably not checks; paid  to whichever merchant/store you're buying from.

Best way to prepare: Have some money at home or in an emergency fund; or life insurance

Debts

What: housing loans, car loans, business loans, personal loans, credit card debts... Technically, heirs aren't obliged to pay them. But the deceased's estate (all money and assets left for heirs) will be used to pay them off, after which the estate tax kicks in - if there's any left.

How: Usually cash; or however the payments were made or agreed upon before.

Best way to prepare:
Life insurance proceeds should help.

But it maybe best not to take on more debt than their assets can support. That way, there's sure to be money left over for the heirs and they won't be burdened with any financial obligations.

Ideally, they should have a tidy sum to help them get on with their lives (assuming the deceased was a breadwinner, even if just secondary)

Estate Tax

What: Since our poor government won't be able to leech money from the deceased, their entire estate is frozen until their heirs pay a nice tidy sum.

How to pay: According to the BIR website, it's paid (most likely in cash or check) to the Authorized Agent Bank (AAB) or to the Revenue District Office (RDO) directly. You need to file the Estate Tax Return (BIR Form 1801).

Best way to prepare: There are 6 ways to do so; it's a personal choice based on the person's situation or preferences. Any one of those (or some combination) will do. Just remember that heirs need to pay the tax within 6 months after you die. Read more about estate planning here.



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Additional resources:

http://business.inquirer.net/money/personalfinance/view/20081031-169422/Is-it-smart-to-invest-in-a-memorial-plan

http://nso.citizenservices.com.ph/registration-of-death




photo credit: Zuviëh via photopin cc

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