After the crowds have left and the flowers have wilted, family members are left to answer, “What do we do with the life insurance money?” When loved ones pass away, those left behind are responsible to pick up the pieces. Life insurance is designed to help and support the family after a death. But in between funeral arrangements, and the emotional roller coaster of losing a loved one, many individuals are not in a suitable frame of mind to be making long-term financial decisions. We’ve put together a simple guide to advise those faced with these difficult decisions.

How To Use Life Insurance MoneyDo’s:

Wait - The time to write checks is not the day of the funeral. Some policies actually require a waiting period, others do not. For all beneficiaries, it is important to allow time to clear the mind and heal the wounds a little bit so decisions can be made. Life insurance should not be spent in the days, weeks or even months following a death. Wait as long as possible before making any decisions.

Short-Term v. Long Term - There may be a few short-term expenses that are unavoidable. Funeral expenses may be the most obvious, the family may need to pay the mortgage or make the car payments, but life insurance should be kept for long-term purchases. Beneficiaries should use life insurance only to stay out of short-term debt for purchases that cannot be avoided. Life insurance should not be used for credit card debt, or day-to-day expenses. Think of life insurance as a long-term investment. Once is it gone, it’s gone, so beneficiaries should think twice before spending it on short-term expenses.

Save at Least Half - Regardless of the size of the policy, beneficiaries should aim to save at least half. Life insurance is meant to replace a wage-earner, but a one-time life insurance payment can quickly be lost if not intentionally set aside.

Don’ts:

Create a memorial - Some beneficiaries go to the opposite end of the spectrum and use life insurance to create a memorial to their loved one. For example, Donna’s husband was an avid baseball card collector, and passed away suddenly in a car accident. Donna chose to spend all of her husband’s life insurance money continuing his hobby of card trading in an effort to honor his memory and use the money for something he would enjoy. On the other hand, Donna went into debt trying to cover all her expenses on less than half her previous household income. This is not what life insurance is intended for. Life insurance is designed to support the living, not the dead.

Give it Away - For those who have substantial savings and legitimately do not need life insurance proceeds, a charitable contribution in the name of the deceased may be a nice tribute. For others, it is a huge mistake. As stated above, life insurance is purchased for the purpose of supporting the family left behind after a death. Always be sure that short-term and long term needs including college tuition, living expenses and retirement are covered before giving away insurance money to another individual or charity.