Death: It's a costly business

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Clients often won’t understand the full cost that death brings. If your clients are struggling to understand how a life insurance payout would help with unexpected costs, show them these eight scenarios calculated by courtesy of lifeinsurancefinder.com.au:

  1. The funeral. This cost is obvious. There are a lot of options for preparing for the event in advance, from prepaid funerals, funeral bonds and funeral insurance. A basic cremation will cost upwards of $4000, while a more elaborate casket, burial and flowers will be around $14,000. There are plenty of variables to change the cost equation, such as a funeral directors service fee, transportation, cemetery plot, celebrant or clergy, flowers, obituary, a headstone and, afterwards, a wake.
  2. The will. There are DIY kits from retailers for less than $100, but clients are likely to waste time and money if it is not done correctly and later deemed invalid during probate. A suburban solicitor may charge from $300 for drawing up a simple will. It will cost more if it is not straightforward, or if you engage a larger legal practice.
  3. The executor. While this person can be a private trustee or a solicitor it is generally a good idea if it’s someone you know well and trust. Professional rates vary as does the work involved in sorting out an individual's estate. A contingency fund of $10,000 to $15,000 is deemed prudent. State-based public trustees offer a sliding fee scale – for example in NSW it starts at 4.4% for modest estates, to 1.1% for amounts greater than $300,000, with a minimum charge of $200. Not all States and Territories operate this way - it is best to check. Laws covering deceased estates are well established. In NSW, again as an example, solicitors acting as executors are governed by a law that stipulates their fees be between $500 and $13,900.
  4. Defending the will. In the absence of a will, assets may get eaten up in a lawyers’ picnic if probate is contested. Getting the right professional advice could save an estate big time if it prevents a will from being contested – which could cost tens of thousands to defend.
  5. Online assets. In this digital age it is more important than ever to protect your online identity. Categorise digital assets – devices and stored data such as photos, videos, music, texts, diaries/blogs, social media accounts, email, licences, file-sharing accounts, financial management accounts, domain registrations, websites and online businesses. Passwords can be left with the executor, a trusted person or a digital estate planner, which may cost a couple of hundred dollars.
  6. The power of attorney. Privacy laws make it difficult or impossible for a third party to act on a person's behalf if they do not have a power of attorney. This could be a trusted person, a solicitor or a State-based public trustee, each of which have varying rates. Having one will make it easier for someone else to pay outstanding medical bills, cancel direct debits, subscriptions and memberships, close bank accounts, phone accounts, utility services, or insurance policies.
  7. The final tax return: This is where life’s only two certainties – death and taxes – come together. Make sure all taxes are as up to date as possible, and that the power of attorney or executor will organise the final year’s tax return. Leaving a last return until after death is likely to cost upwards of two hours in management fees or between $300 and $1,000 to finalise.
  8. Personal items. Cleaning up household items can be emotional for those left to do it. A skip bin can cost anywhere from $200 to $800, or storage if family members want to keep some items. A self-storage space the size of a bedroom (3x3x2.4m) will cost $245 a month in an inner-metropolitan area. That adds up quick – accruing about $3,000 a year. Outer-urban storage is about $100 a month, less expensive, but still chews through $1700 a year.

If clients don't have a policy in place, then it's vital that they account for these costs well in advance.

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