Including a funeral in your financial plan can save your family extra stress.
By: Stephen Segal
6 months ago
The most important reason to plan your funeral finances in advance is much the same reason it’s important to budget for anything in advance. If you wait until you’re urgently in need, you won’t be in a strong position to calmly assess the situation and chart a prudent course that meets your family’s needs.
Many people avoid thinking ahead about the details associated with a future death, though. For the sake of emphasis, let’s put it a little more bluntly:
Every single one of us is going to die someday. As heavy as that is, it’s a normal part of life. If you die without having already accounted for a funeral during your regular, everyday financial planning, you are forcing your loved ones to get walloped with painful choices and large bills at exactly the moment they will be trying to cope with the grief of your loss.
So add funeral planning to your list of things to budget for. “These are tough conversations for many families, but important ones,” says Patrick O’Brien, CEO of Executor.org, a website that offers interactive tools to help estate executors. He suggests giving family members a heads-up that you want to begin this discussion—and letting them know right up front that there’s no crisis prompting it, just a desire to tend to important family responsibilities.
There are many different approaches to setting aside money in advance to cover funeral and related expenses. Each solution offers its own pros and cons. Some of the most common include:
A simple joint bank account that specifies rights of survivorship. If you can trust a family member to refrain from touching a joint bank account until it’s needed, this may be the easiest approach. It will offer little interest but is quickly accessible without red tape when the time comes.
A payable-on-death bank account. This kind of account can only be accessed by you while you’re alive, and then by a designated beneficiary upon your death—but they’ll need to present your death certificate first, which sometimes can take weeks to get.
Funeral home prepayment. This option, if you can afford it, allows you to make all the decisions yourself, so your grieving loved ones won’t have to. Depending on the details, it may tie you to a specific funeral home, so if you move away or have to change your plans, you may not get a full refund.
Burial insurance. A burial insurance plan sold by a funeral home will be payable for funeral costs immediately, but it’s also possible that you might pay more in premiums over time than the actual funeral expenses.
Whole life insurance. A whole life insurance plan sold by an insurance company is fully portable if you move, but it may take 30 days for the company to verify and pay your claim.
As you explore these options, both with specific financial providers and using online reference resources, consider your specific situation. How much can you afford to set aside? Is your family good at cooperating to manage money decisions in a time of stress?
Whatever approach you ultimately choose, O’Brien says, make sure to let your family know. They’ll need to know how to access the documents, including contact information for any financial providers and passwords to online accounts.
It’s worth remembering that there are likely to be additional expenses to account for on top of the funeral home costs. Is the burial plot included? The headstone? Be sure to request and review an itemized list of all the funeral/burial services you’re paying for.
“Depending on your family situation, you may want to consider trust estate planning through an estate attorney,” O’Brien says. “A quality financial adviser who understands your investment time frame can be a great resource in making sure you maximize the growth of your assets, and that they are available without penalty when you need them. If your goal is simply to set aside enough money to pay for a funeral and related costs, ask trusted local professionals for referrals to help you find highly reputable funeral homes to discuss pre-planning options. Be a smart consumer and get several quotes.”