Avoiding Expensive Funerals

When planning a funeral, the expenses can add up quickly. The average funeral costs about $7,300, including the casket, embalming, and transportation, and if you include extras like flowers, obituary notices, and acknowledgement cards, the price goes even higher. However, there are several ways you can save on funeral expenses.

• Cremation. Cremation can be cheaper than burial. For one thing, you don’t need an expensive casket if you plan on cremating. You can rent a casket for the viewing (if you have one) and then use a cardboard casket for the cremation. The cardboard casket is cheaper and more environmentally friendly.
• Direct Burial or Cremation. If you don’t want to have a viewing, you can do direct burial or cremation, which means your loved one is promptly buried or cremated without a funeral or viewing. You could then organize your own memorial service at your home, a church, or a function hall.
• Home Funeral. In most states, families can have home funerals. A home funeral is when the family prepares the body for burial or cremation without the help of a funeral home. Families can make their own caskets; wash and dress the body; and hold their own memorial service, wake, or viewing. For more information on home funerals, click here.
• Shop Around. Casket prices vary considerably, and even cremation prices can vary. You need to call several funeral homes to find the best price. Ideally, you would begin shopping around before your loved one passes away, but that is not always possible. You can save money by buying a simpler casket, and resisting being talked into spending for unnecessary extras like a casket seal. You may also be able to find deals on caskets on the Internet.
• Donate to Science. Donating a loved one’s body to science is not only a no-cost option, it also helps medical research. To donate a body, contact a local medical school. The medical school will pick up the body and use it to teach students about anatomy. Before donating, make sure you are donating to a legitimate medical school’s program, and not a for-profit company.

What about pre-paid funerals? The Funeral Consumers Alliance advises against them in nearly all cases. For more on the risks of pre-paid funerals, click here.

For more information on saving money on funerals, click here and here.

To discuss funeral planning or other Elder Law matters with an attorney, please email the Elder Law Center or call 630-844-0065. The Elder Law Center is located in Aurora, IL, Kane County, in the Chicago Western Suburbs.

To Roth or Not to Roth?

Now that 2010 has arrived, people whose incomes were previously too high to permit them to rollover a traditional IRA to a Roth IRA are calling their investment houses about making conversions. That’s because for the first time, even if your annual income exceeds $100,000, you can convert a traditional IRA — or a SEP IRA, Simple IRA or 401(k) or 403(b) plan held with a former employer — to a Roth IRA.

What’s all the excitement about? To review, a Roth and a traditional IRA are effectively the opposite of one another. You get a tax deduction by contributing to a traditional IRA, but the money you take out is taxed at ordinary income tax rates. While there is no immediate tax benefit for contributing to a Roth, you don’t have to pay tax on the money when you withdraw the funds in retirement. Also, while the original owner of a traditional IRA is required to start distributions after age 701/2, the original owner of a Roth IRA account is not required to take minimum distributions. One major downside to converting from a traditional IRA to a Roth is that you have to pay income tax on the amount you convert.

Many investment firms are pushing these conversions because they represent new sources of funds to manage. But should you make the conversion? Financial articles on the pros and cons of Roth IRA conversions have proliferated like bankers’ bonuses in the past few weeks. Below is a roundup of a few that look particularly helpful. The general advice is: don’t rush in before you understand all the variables.

• Kiplingers: “The New Roth Rollover Rules Explained”
• MarketWatch: “Roth it right: Six mistakes to avoid when converting to a Roth IRA”
• retirementrevised: “Should you join the Roth conversion parade?”
• Time magazine: “Traditional IRA vs. Roth IRA”
• MoneyWatch: “Don’t Rush Into Roth IRA Conversions”
• The New York Times: “Deciding Whether a Roth Is Right”

Financial Crisis Affects Prepaid 529 Plans

The uncertain stock market has made prepaid 529 plans more attractive to parents looking to save for their children’s college education. However, the same economic problems that have increased the popularity of the plans are also putting the plans in jeopardy. Many plans are running out of money, causing states to impose higher fees or consider shutting them down.

A prepaid 529 plan is usually operated by the state government, though some institutions of higher learning may offer their own plans. Prepaid 529 plans offer parents the opportunity to lock in tuition for their child at today’s rates. There are two different kinds of plans: unit or contract. Unit plans sell units that are a fixed percentage of tuition (e.g., one unit is 1 percent of tuition costs). Parents can buy as many units as they want each year. Contract plans allow parents to purchase a specified number of years of tuition. While prepaid 529 plans won’t increase in value, as a traditional 529 plan might, the tuition rates are guaranteed.

The stock market slump combined with rising college costs are causing many of the prepaid plans to lose money. According to an article in The New York Times, all but two of the 18 prepaid plans in existence do not have enough money to pay all of their future tuition obligations. States are taking a number of steps to deal with these losses. Texas is reducing the payout to children who choose not to attend college in Texas, Pennsylvania has begun imposing premiums on investors, and Alabama has closed its plan to new members.

For more information on how the financial crisis is affecting prepaid 529 plans, click here and here.

At the same time, SmartMoney reports that “529 Plan Fees Are Dropping.”