Protecting Loved Ones: Making and Financing Funeral Arrangements

Nobody likes to confront their own mortality and deal directly with issues involving their own funeral or the disposition of their estate. It’s a conversation that too many push to the back burner and often leave there until it’s too late. However, it’s important to consider those you’ll leave behind when you pass on and think about how death and funeral arrangements will affect them not just emotionally, but financially as well.

The average funeral today costs between $8,000 and $10,000 along with the cost of a casket, so ignoring funeral costs and arrangements can leave your family on the receiving end of a very hefty bill. Think of it as you would the need to apportion your estate through a will so loved ones are provided for after you’re gone. Below are several ways to prepare financially for a funeral:

POD Account

Consider establishing a payable-on-death account. Banks and credit unions allow their customers to make in which all accounts belonging to you are transferred to beneficiaries that you name. It’s a free, simple, and convenient way to provide family members with the money they’ll need to defray the costs of your funeral and other final arrangements. If you have investments, set up a transfer-on-death (TOD) account, which transfers the value of investments to beneficiaries.

Burial Insurance

Also called final expense insurance, burial insurance covers the cost of a funeral and service, headstone, urn, and other associated expenses. It operates like a life insurance policy though on a smaller scale and can be a valuable asset because it can also be used to pay off medical bills, loans, and any other personal debts a loved one may have incurred.

Prepayment

This is a popular choice for many people, though it’s important to fully understand how the money you pay will be managed/held until it’s needed. For example, ask what happens if the funeral home with whom you’ve made arrangements goes out of business or if the service is held elsewhere. Never assume that all will go as planned unless you know for certain. Alternately, a beneficiary can transfer part or all of a life insurance policy proceeds to the funeral home when necessary. Ask the funeral home if there’s a cancellation policy and how much they would retain in the event of cancellation.

Pre-Need Policy

A pre-need policy is an arrangement you make with a funeral home that allows you to pay for a funeral in advance in full, or to set up an installment plan with payments that suit your budget. The money goes to an insurance company that offers tax benefits and growth opportunity, and it can be transferred to a different funeral home should you move. A funeral trust is an investment that also offers the benefit of growing your money, which is used to cover your funeral.

Advance Funding

This option is an advance on your life insurance policy death benefits. It’s a convenient option because funeral homes sometimes will file the claim on your behalf to help family members receive the money, minus a small administrative fee, as soon as possible, usually within 24 or 48 hours of the insurer verifying the terms of the policy.

Personal Loan or Credit Card

A loan and credit card are less-desirable options given the interest you will pay on the amount borrowed to pay for the funeral. Your funeral home can be a good resource of information if you need to find a loan. They likely will have a list of companies that will make funeral loans without interest for the first few months.

There are many prepayment opportunities that can take care of funeral costs and arrangements simply and conveniently. It’s worth investigating considering the thousands of dollars you can save those you leave behind. Consult a financial planner if you’re confused as to which options are best for you.