One of the most difficult and troublesome questions is how to pay for a burial or cremation and the service. Sometimes a caller asks about the best funeral insurance or the value of prepaying a funeral home for a burial and funeral and often the issue is raised after a death when the family is making expensive plans but has no money to finance them.
FCAofCT has some serious cautions about insurance and prepaying and some simple ABC recommendations on financing.
Cautions
Funeral/or death insurance: The TV and magazine ads tout the relief you will feel once you sign up for insurance; you pay in and the company will pay out and everything is taken care of with no worries. But funeral insurance, as Josh Slocum points out, is not “a magic money pot.” Unlike other insurances which pay out against unexpected risks – fire, flood. accidents – that most people will not experience and therefore not get a pay-out for their premiums, death is inevitable for everyone, and payouts are certain for all. The only way an insurance company can make money, therefore, is to pay less than it takes in. (Most policies also require waiting periods of one to three years of premium paying before death occurs and the policy will pay.) This is not a good deal!
Prepaid Funeral Contract: If you pay a funeral establishment in advance for everything you have planned there are the advantages of avoiding inflation and sparing kin the funeral expenses. But this only makes sense if you can guarantee that there will be no changes, since changing the contract is complicated and results in at least a 5% penalty. Are you sure that: you won’t die when travelling, won’t move, won’t change your mind? Are you sure that the funeral establishment won’t change hands, have deteriorating facilities and services, won’t successfully “up-sell” your family on a more expensive casket or other items? The safest way to guarantee there will be no changes is to pre-pay just before death, but that will not be a big hedge against inflation!
Recommendations
Avoid Debt: A dignified, reverent funeral or memorial is important but spending a lot and going into debt is not the best way to honor or show love for the deceased. Would you really want your kin to take on a big debt for your funeral? Do you really think your mother would want you to be heavily indebted for hers? If an expensive funeral was so vital, wouldn’t there have been adequate savings to cover the costs? Be clear you don’t want to impoverish your kin on your death.
Bank Savings Account: Opening a savings account at your bank can help you to both save and collect interest. Consider opening either a joint savings account with a trusted executor or a Totten account payable on death to provide money for death expenses. It’s true that a savings account depends on your personal discipline to save. Neither a joint savings account nor a Totten Trust has the whips and locks of a funeral insurance – there are no penalties for failing to make a deposit and funds can always be withdrawn to meet another priority. But it will give you the chance to make your own decisions and will allow you to collect far more than in a funeral insurance plan because you will get back your deposits and your interest.
Compare Prices, Consider Alternatives, Compromise if Necessary: Compare the prices at several funeral establishments to see which is less expensive. If all of these are still high, consider the alternatives; if you were hoping for a funeral, which, by funeral home policy requires embalming, would a less expensive casket – perhaps draped with a flag or quilt – and less costly outer container be affordable? would the body qualify for a donation to a medical school? Which of the non-embalming procedures – direct burial or cremation – would be most appropriate and affordable? Compromise may be necessary, to avoid the expenses of embalming, since funeral home policy precludes a funeral with the body and coffin present. There are strong financial advantages in avoiding the high costs of embalming and a funeral, as well as strong environmental reasons to avoid the toxic seepage of embalming formaldehyde. A memorial has other advantages also since it can be planned at a later, convenient time and appropriate place.
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This page was revised on 11/04/2024