There comes a time in all our lives when it is natural to contemplate your death and thus your funeral. This is not a new phenomenon, The Egyptians for example made it a life’s work to erect ever bigger and better pyramids than their predecessors, the Vikings sailed their burning long boats into oblivion and not to forget of course, the most romantic and beautiful resting place, the Taj Mahal, built by the emperor Shan Jahan for his wife Mumtaz. Even the sailors and pirates of old ensured themselves a good send off by always wearing expensive jewellery (usually large gold earrings) to pay for it.
In recent times funeral planning has once again gained in popularity. For most people it generally takes the form of a separate savings account, an insurance policy or a pre-paid funeral plan. So what are the respective advantages of these three different ways of arranging your funeral in advance and is it worthwhile?
Whole of Life Insurance Policy
The advantage of a life insurance policy, over not having one, is obviously the fact that there will be at least the proceeds of the policy to fund or part fund the funeral. The disadvantage of having just an insurance policy is that generally it is subject to conditions such as being subject to medical acceptance and/or an initial qualifying period. There is no guarantee that the policy will cover the costs and your family or friends are still left with the responsibility of arranging the funeral, possibly in a way not to your liking.
A Savings Account to cover the cost of the Funeral
Whilst it is better to have savings to cover the cost of a funeral than not, there is no guarantee that the savings will be large enough to cover the cost. Once again, as with insurance your family and friends are left with the responsibility of arranging the funeral which can cause disputes at a sad time.
A Pre-paid Funeral Plan
In our opinion this is the only way to achieve the exact wishes of the person whose funeral is being provided for.
It has the following advantages: -
1. It gives control to the plan holder, to plan and control the exact detailed itinerary of his or her own funeral, leaving no room for doubt.
2. The funeral wishes are set out in a guarantee, leaving relatives and friends with no reason to alter or ignore the plans of the plan holder.
3. Because of the rising cost of funerals, it removes the worry of affordability for the plan holder's estate.
4. A local funeral director can be chosen by the plan holder to undertake the funeral arrangements.
5. Because everything is taken care of in advance, it gives the plan holder peace of mind for the remainder of his or her life.
6. It actually makes the plan holder give thought to the actual funeral arrangements that may otherwise be overlooked.
7. It allows the bereaved a greater opportunity to grieve without being distracted by the huge responsibility of organising the funeral at a time when they could be acutely distressed and least able to handle the practicalities of the death of their loved one.
8. The cost of the funeral is guaranteed to be covered, up to the RPI (retail price index) for all future years, meaning no further payments are necessary to ensure the plan holder receives the funeral that they want.
9. Depending on plan holder's requirements, payments for the funeral plan can be made in one instalment, extended over a year free of interest, or over a longer period with an interest charge.
10. If professional executors (Banks, Solicitors or Trust Corporations) have been appointed in the plan holder's Will, the estate is relieved of the professional charges involved in such bodies organising the funeral arrangements.
11. Potentially, if left todistressed relatives and friends (including the executors), there is a greater chance of the funeral being badly organised, of the funeral not being what the deceased would have wanted and of the funeral costs being excessive if there is no time to research the market for the best funeral package.
12. Statistically, for the past decade or more, funeral charges (including local authority costs forcremation etc) have been increasing at a greater rate than inflation and thus it makes financial sense to make the purchase at today's prices rather than at future prices.
13. Monies paid today are not kept by the funeral planners, but are put into a Trust, which is managed by trustees who are charged with the responsibility of ensuring the monies are kept secure in accordance with the rules governing the Trust. In other words, the Trust monies are invested conservatively in secure investments and should there be a shortfall between a client's invested funds and the price of a future funeral as already specified, it is agreed in advance as part of their contract that this will result in an additional cost for the funeral directors, not for the plan holder's estate.
14. Sometimes, where a person does not have a large amount of savings there is a concern towards the end of life that there may be insufficient funds for the rising cost of a funeral. The result is that there is a reluctance to spend any money even when it could be beneficial to the plan holder's welfare. By paying for the funeral in advance the remaining funds are there to be spent without any worries, if so desired.
15. In addition to the financial sense as referred to in points 12 and 13 above, there are specific cases where the question of purchasing a funeral plan is beyond doubt and should not be foregone.
The person who has capital that is slightly in excess of the maximum personal amount that can be held before state benefits can be claimed. In such cases to reduce capital by buying a funeral plan will accelerate the chance of claiming state benefit. If a funeral plan is not purchased in these circumstances, the person would remain without state benefit until the capital had been eroded to the maximum threshold, with the funeral costs being paid for at a future price level, out of the remaining capital in the estate.
The person who has capital that is slightly in excess of the maximum permitted to be held before seizure of assets to pay for care home charges. In such circumstances to reduce capital by purchasing a funeral plan ultimately means that it is possible to keep the maximum permitted capital in place without the estate, on death, having to pay for the funeral.
Understandably, the truth is that most people do not like to linger on the thought of their death and consequently will instinctively think of an excuse to do nothing: -
“I don’t care what happens when I’m gone”
True - but without any planning, your funeral is a greater burden for your family and friends to bear at a time when they are grieving.
“I’ll do it later”
Do it now and you can rest easy without having to keep thinking about not having arranged your funeral.
“It’ll be cheaper to shop around when the time comes”
Well it won’t be you shopping, and when someone dies, doing deals isn’t uppermost on peoples’ minds. Also with constantly rising prices surely it is better to pay a guaranteed price now than a higher price in the future
“What if I move home?”
The plan can be relocated to another local funeral director
“I’ve got insurance to cover my funeral”
But is it sufficient and will it pay out fast enough to cover your funeral? Perhaps it is better to pay for the funeral now and let the proceeds of the insurance policy fall into your estate on death.
“I’ve got money for my funeral in a savings account at the building society”
Good, if you transfer it to the funeral plan scheme, you will never have to worry about the funeral costs again, and you are free to save or spend any surplus monies.
“My money is safer where it is”
As mentioned elsewhere, with a funeral plan your money is held securely in trust and cannot be touched by either the funeral planning company or the local funeral director
The Willwriting Partnership can give you a choice of companies who provide Funeral Planning services.