Wednesday, January 13, 2010

Should I Set Aside Money for Morbid Reasons?

I've set aside $5,000 of my recent windfall for my parents. No, I'm not planning to give it to them - - I'm thinking about setting it aside to deal with their eventual death.

It's no secret that my parents seriously mismanaged their finances. They don't own their own home (they rent) and they live off of Social Security (which barely pays their rent) and a small pension from my dad's old job. They have no retirement or savings to speak of and no life insurance. My dad bought himself a $200,000 term life insurance policy that will expire some time in 2011.

My mom (age 67) is in relative good health, but my dad (age 73) is a complete mess. He suffers from serious COPD, or chronic obstructive pulmonary disease. Just think of the person with the worst case of asthma you know, who's constantly wheezing and sucking on an inhaler/nebulizer. If that wasn't bad enough, my dad suffers from advanced dementia. When I saw my dad this past holiday, his memory loss has progressed to the point that he can't even remember what he did/ate the night before. And one last thing -- my dad's a diabetic. In other words, my dad is no longer insurable for life insurance.

My parents have made no plans for their death. No wills or trusts (not that they need one since they have no assets) and no pre-planned funerals. With no life insurance, the cost of dealing with their death will be borne by my sister and me.

This article talks about how to plan for a frugal funeral. The best way to save money on a funeral is to plan it and pay for it now. According to AARP, the price of a funeral doubles an average of every seven to 10 years. You could also spread out the payments over several years and the price still won't change. The pre-paid money is put into an insurance policy or a trust and can't be touched. Merchandise isn't bought and stored.

I don't expect or wish for my parents' imminent death. I just want to be prepared for it now. After all, there are 2 certainties in life, tax and death. I haven't broached my parents with this topic yet and I'm not quite sure how without giving them the impression that I want them dead.

I asked an older friend for advice about this and she felt that the money should be spent on the living. Since there is very limited time left where my parents will be both mobile, perhaps I should use the money to go on a vacation with them. She especially feels that my mom deserves a break for caring for my sick dad. I have to admit, my mom's caretaker fatigue is clearly showing.

What do you think?


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Bouncing Back said...

I would take part of the money and take a small trip. What you can do is research funeral costs in your area. I know that sounds really morbid, but getting an idea now of what a funeral costs means you won't be pressured into "extras". The funeral industry is just like any other sales driven market. They make money on the extras.

ndchic said...

Check to see if his current life insurance policy has a convertible feature that would allow you to convert a small portion to a permanent life insurance policy. Most term policies, even group policies, do offer this benefit but often times the benefit expires at age 65. I think its still worth checking into. Keep us posted.

me in millions said...

It's kind of morbid, but also kind of smart. If you know it will be an expense you will have to deal with, you should def start saving.

Sunflowers said...

I agree with Bouncing Back - can you use the money for both, a small trip and savings for a funeral? It's smart of you to want to be prepared. It's not something anybody wants to think about, but it's an impending reality.

Revanche said...

I would absolutely set that money aside. I mean, you know that it's going to happen at some point and it's going to be very difficult to deal with, best you already have the money set aside so you're not scrambling during one of the possibly worst times ever.

Is the windfall enough to support a small trip in addition to the savings? If not, perhaps you can do something nice for them anyway that's not a trip - particularly since even if they're still rather mobile, they might not want to be on a trip, they might prefer a different experience.

Having spoken to a lot of my friends' parents, most of those in ill health want a break but actually don't want to travel. Perhaps nice meals and spa days spread out over a few weekends would be an option?

The Lost Goat said...

I'd save the money - but not pre-pay the funeral. I am only speaking from my own experience here, but my aunt pre-paid her funeral and then, mysteriously, there were all these extra "fees" that her grieving husband and children had to deal with. It turned out to be a huge scam and didn't save anyone any pain or trouble as she had hoped that it would.
Also, there are always people coming up with cut-rate funeral ideas. Aria, in the Dallas area, has a cremation service that costs ~1K for cremation only and ~2K if they handle the funeral beforehand. And you have no guarantee that the places you pre-pay will still be in business when you need them.
As for the trip idea, I like in a low-cost rural area and 5K would barely cover two funerals. I imagine that your area has some sort of pauper's burial available, but I know I personally would have a hard time abandoning my parents' bodies so that they would qualify. It's neither frugal nor rational, but I want to give them a nice service and a burial somewhere that I can visit their earthly remains.
I don't think it's morbid to plan ahead for this sort of thing - after all, we are all going to die. Taking reasonable measures to plan for your parents funeral expenses will not hasten their death and does not in any way make you a bad daughter, nor are you responsible to use that money for them.

Miss M said...

Unfortunately even basic funerals aren't cheap. Do you know your parents wishes, ie do they want to be buried or cremated? If they want to be buried $5000 won't cover even one of them. My grandmother's funeral cost $5000 and all the burial costs (service, plot and headstone) were free because she was a veteran and buried in a national cemetery. The $5k was for casket and handling of the remains only. I don't think it's morbid to plan ahead, funerals are expensive and inevitable. I think setting aside the money is prudent, though I don't think I'd prepay the cost. As someone mentioned often they'll stick you with extra fees in the end, you'll wonder what on earth you paid for.

paranoidasteroid said...

Really, it sounds like your mom might appreciate someone taking over the caretaker responsibilities for a few days.

I don't think it's morbid to be saving money for their funerals. Clearly it's going to happen sometime, and it might be easier to have the money available than to have to worry about coming up with the money and having to give your parents less than what you would want for them.