- Paying for your funeral with savings
- Paying for a funeral with life insurance
- Using the estate to cover costs
- Finding out what a loved one put by
- Paying bit-by-bit
- Other support available to you
The old saying tells us that the only two certainties in life are death and taxes. These are also things we don’t like to think about for too long.
That is, until we’re confronted with them.
When a loved one dies, we don’t want to turn our minds immediately to the costs associated with that death. It doesn’t seem appropriate, somehow, to treat it as a financial matter. Unfortunately, there are financial events that need to be dealt with rather swiftly after the passing of a loved one.
One of these is the funeral, and knowing the budget available for the event as well as what sort of event you want it to be will help you plan.
If you want to plan for your own funeral, then you can help your loved ones by setting aside a fund of money to cover the costs. There are a number of ways of doing this.
If you have the means, then saving specifically for your funeral is a safe way of making sure there is enough (or at least an amount) available when the time comes.
Savings would need to be readily available in order to pay for a funeral, rather than being tied up in things like the sale of goods or property.
Bear in mind that savings for later life might involve many demands on the money. Care costs, including to cover unforeseen emergencies, credit card repayments, utilities and so on all need to be factored into a savings plan.
The average cost of a funeral in 2018 is £3,757*. But this is an average of both cremation and burial funerals. The average cost of a burial funeral is £4,267 – and this figure can go up depending on where you want to be buried.
Researching these costs is vital to create a realistic and achievable savings budget.
To make monthly contributions to an overall funeral fund, you might want to think about an over 50s life policy.
This can be thought of like saving, but has some important differences. It can’t be used in advance of the payout, and you as policy holder would not receive the payout. Instead it would go to your beneficiaries.
You pay monthly premiums to your insurer who will pay out an agreed sum to your beneficiaries upon your death. Since you know what the payout is when you take out your policy, you can plan your funeral accordingly.
And if your desired funeral is a little over the budget of your payout, you can make savings plans to manage the difference.
In general, over 50s life policies are guaranteed to pay out. You might pay in for an agreed period of time, or up to a certain age, after which time you can stop paying your premiums but still receive a payout.
For some insurers, you will continue your premiums until you pass.
Over 50s life policies will typically ask very few medical questions, and some (like Post Office Over 50s Life Cover) won’t ask any. Depending on how long you live after taking the policy out, your payout might be more than you paid in. However it could also be less.
Lots of providers offer pre-paid funeral plans. These are schemes whereby you pay a fixed cost for your funeral, either in a lump sum or in instalments.
There advantages and disadvantages to pre-paid funeral plans. A strong benefit is that you pay for your funeral at its current value, effectively 'locking in' the price - even if that increases in the future.
However, due to the changes in the cost of burial and cremation, these items are often only partially covered (or not covered at all) by pre-paid funeral plans. This might mean you or your loved ones need to spend extra come the time of the funeral to meet the cost of burial or cremation at the time.
It’s increasingly common for families to take on debt in order to pay for funerals, as highlighted by the Royal London Funeral Index Report 2018. Average debt is £1,744, which is a large sum for many people.
If you are less able to manage debt of this scale, it’s important to try and find alternative ways to pay for the funeral of a loved one.
It’s possible to pay for the funeral of a loved one out of their estate, however this can normally only be done once the probate process has been completed. Typically, probate is a slow process and the funds of the deceased can take many months to be released. Since funerals need to happen relatively soon after death, paying for a funeral out of an estate usually requires borrowing money against the value of the estate.
This can be a risk, particularly if you don’t know how much money the deceased had or the value of the estate is bound up in property and goods which would need to be sold to meet the costs. Some funeral providers can manage the process of the funeral and then later recouping costs from the estate for you, however you are most likely required to pay for the funeral out of your own pocket in the first place.
Your loved one might have had a life insurance policy or pre-paid funeral plan which can be used to pay for costs. If you have the opportunity to find out before their passing whether this is the case, it’s worth doing so even if the conversation is uncomfortable. It’s likely that someone who has had the foresight to plan for their own funeral has done so to help you out.
If you are the beneficiary of a life insurance policy, this will either be something you know about already or it will be mentioned in the will.
Some funeral providers are able to offer monthly payment arrangements to help you spread the cost of a funeral. This won’t reduce the cost of the funeral, and if there is a credit agreement involved, could increase it, but it might make things more manageable for you if you are responsible for paying for it.
There is limited government support for help with a funeral. This could take the form of a Public Health Funeral, which is where the local authority pays for and organises a person’s funeral. This is only available in very specific circumstances and should not be treated as a low-cost way to organise a funeral for a loved one.
Similarly, the government offers financial assistance to low-income households who can’t afford the cost of a funeral themselves. However, this does not apply to every low-cost household. You would be required to be the recipient of certain government benefits.
Moreover, you may be expected to repay some or all of the costs from the person’s estate if they hold sufficient amounts after probate.
Whether it’s your funeral or that of a loved one, proper planning can take a lot of the pressure off.
Having the knowledge that there is enough money available and that you can manage to cover costs can bring peace of mind and help you focus on getting the event right.
There are a number of ways to reduce the overall cost of a funeral too. We have a guide to how to keep funeral costs down, as well as guides on cost-effective ideas like direct cremation.
*Source: Royal London Funeral Cost Index Report 2018