Financing a Funeral
Planning a funeral is not what most people would envision as a fun way to spend an afternoon, especially if it’s your own. However, it is a task that should not be neglected. A funeral can cost as much as a new car, and without proper planning, loved ones can be stuck with bills they cannot afford to pay.
Determine the details
Whomever the funeral is being planned for, a good place to start is determining what the funeral recipient wants. Doing this lets you know what needs to be purchased and gives you an idea of the funeral’s price tag. Costs can include:
- Funeral home expenses, such as embalming, storage of the body, space for the funeral service, and the funeral director’s assistance.
- Religious service, if the religious institution charges for use of space and religious official.
- Obituary in the local paper.
- Flowers for the funeral.
- Transportation expenses, such as a hearse, police escort, and limousine for the family.
- Burial expenses, such as a cemetery plot, coffin, and headstone; or
- Cremation and urn.
Shop in advance
While people often buy cemetery plots in advance, it is less common to shop for other expenses before death. Grief-stricken family members are usually in no mood to shop around for the best deal and can frequently be convinced to buy more expensive products and services by smooth-talking salespeople. You may come in wanting a simple $750 pine casket but leave with a $3,000 stainless steel casket with silk lining.
Shopping in advance not only allows you or relatives to make decisions in a clear-headed state, but it also gives you time to look for the best deal. Go to the funeral homes in your area, and ask for a price list. By law, funeral homes are required to give you one. Let them know you are shopping around; they may be willing to give you a better deal. Why limit yourself to funeral homes? Many products, such as caskets, can often be purchased for less at funeral supply stores or online. Purchasing everything before death is not necessary; by doing comparison shopping beforehand, you or your relatives will have a better idea of where to go later.
Create a financing plan
Many funeral homes and other funeral-related companies expect payment at the time they provide their goods or services to customers, to avoid the hassle of trying to collect later. Few people can instantaneously come up with a large sum of cash. Some, scrambling to find funds after a loved one has died, find they have no choice but to turn to high-interest financing methods, such as credit cards and personal loans. However, by planning in advance, there are more methods at your disposal, including:
- Life insurance. Life insurance is not just for working adults wanting to provide income replacement if they die. It can also be used to pay for one-time costs, like funeral expenses. While people usually choose a spouse or child as the policy’s beneficiary, you can also choose a funeral home. In general, the older you are when you first buy the policy, the higher your premiums. It is a good idea to shop around and compare policies. Who offers the lowest premiums is important, but you should also consider other factors, such as how long it takes the company to pay out its policies and its reputation. While getting life insurance to finance a funeral can be a good option for some, those that can save enough to pay for one on their own may not want to use this option, since the premiums can be high, especially for seniors.
- A prepaid funeral plan. Prepaid funeral plans, also called pre-need agreements, can be purchased from funeral homes. Because prepaid funeral plans allow you to buy goods and services at today’s prices, they can save a good amount of money for those that purchase the plan years before they die. However, since there have been many incidents of abuse, caution is needed. Go to at least a few funeral homes, and ask what they cover in their plans—it can vary. Ask where your money will be held. A trust is preferable, since it prevents the funeral home from using the money for whatever it wants. Ask if you can cancel the plan and get your money back. Check how many, if any, complaints there are against the funeral homes with the Better Business Bureau, and avoid purchasing from one with excessive complaints. If you are purchasing a plan for yourself, make sure to get a list of what you paid for, and give it to your family, so they can make sure the funeral home actually provides it.
- Savings. Some people may already have the cash they need to pay for a funeral. However, if you do not, regularly putting aside money into savings can help you accumulate the amount you need. If you are saving for your own funeral, keep in mind that if you leave the money in your savings account, the probate process could delay your relatives from getting the funds until long after your funeral has passed. One way to avoid probate delays is to put the funds in a joint account with a relative or whoever will organize the funeral, as joint accounts do not go through probate. Funds that are held in trusts also avoid probate. Totten trusts, which are payable upon death, are commonly chosen. Another option is to give a relative the money before you die. However, if you are planning to give a large amount, you may want to research the IRS’s rules on gift taxation, available at www.irs.gov.
Death is a depressing event that few want to think about. However, it cannot be avoided. Creating a plan in advance for dealing with funeral costs means loved ones have one less thing to worry about.
Revised January 2016.