Death isn’t a pleasant subject. It can be terrifying to others, mostly due to the fears of the unknown. Most people worry that when they pass on, they might not leave enough finances for their funeral and their family will be left with the bill or worse, debt.
However, it can be reassuring to know that your family won’t have to worry about funeral planning and to organize every detail on your behalf. Isn’t that incredible? What’s more, you can create a funeral plan for your funeral, as long as it’s held within the remits of the UK.
With that, here’s a detailed guide to funeral planning.
What’s Funeral Planning?
Funeral planning before death allows you to arrange and cater to your funeral arrangements effectively. You can do this by making lump sum1 payments, regular income or through instalments. Having a pre-paid funeral arrangement assists in reducing the stress and financial strain on your family – even though they have the right to pay for your funeral using the capital from your estate as soon as you pass on, and it isn’t subject to inheritance tax2. A funeral plan also helps In locking in the cost of a funeral at the modern-day prices.
Pre-paid funeral plans can be organized directly with a plan provider or a funeral director. You can opt to take out a specific type of funeral, and you also have the option of picking the extras you’d want for your funeral, like the form of service and coffin.
Is There Anything Like A Funeral Checklist?
Today, funeral planning companies offer clients options and advice you have a funeral checklist. So, what are some of the things stated in a funeral checklist in the UK?
- Would you like a funeral service, burial or cremation?
- Do you want the event to be religious?
- Would you or your loved one preferably the event wasn’t religious, perhaps humanist, instead?
- Is there a specific place where you or your loved one would want to be buried or do you want your ashes scattered?
- Will you consent to have your organs used after dying?
- What about donating your body for scientific purposes?
- What type of urn, casket, coffin or headstone do you prefer?
The People Checklist
- Who would you want to attend the funeral? What about kids?
- Do you want there to be any prayers, poems, hymns, specific reading or songs used?
- How do you feel about flower arrangements and tributes being brought by mourners?
- Is there any cause or charity organization you’d like to benefit from donations instead?
The Arrangements Checklist
- Apart from the funeral payment plan, are there any other financial obligations you could take care of?
- Is your life insurance policy up to date and enough for your heirs’ needs?
- Have you done any estate planning? Have you made any arrangements to cater to inheritance tax implications?
- If your health worsens, have set up a Lasting Power of Attorney3?
- If you’re relatively young, who would you want to take care of your kids?
What Are the Costs Involved with Funeral Planning?
There are several payment plans when it comes to funeral planning. Some of these include:
A Lump Sum
If you decide to pay the funeral plan with a lump sum, you’ll choose your funeral package and cater to the plan provider costs in advance. They’ll then organize your funeral and support your loved ones when the time comes.
A typical lump sum plan costs about £3,000 to £5,000. The lump-sum payment plan also ensures that you get the funeral you want at today’s prices so that inflation won’t have any impact.
Funeral payment plans vary from lender to another. However, most firms often let you stretch out the payments for several years, depending on the type of funeral plan you choose. The full expenses of your funeral plan might not be covered until you’ve paid all of these instalments.
Typically, for instalment periods of over 12 months, the total amount you’ll pay will be more than the lump sum amount. For instance, taking a plan that would cost, say, £4,000 as a lump sum could cost you £5,000 of you choose to pay in instalments over five years.
Monthly Payments into A Life Insurance Policy
Some plan providers use funeral plans that are covered by insurance policies. So, when you pass away, the insurance payout will go into paying for your chosen funeral services.
There are two forms of insurance-backed funeral payment plans. These include:
Funeral plans offered by funeral directors – the premiums you’ll pay the funeral director will be used to pay for a life insurance policy that’ll payout to them when you die. The capital the funeral director4 gets from the life insurance will then be used to cater to the costs of the funeral services you’ve requested. The Funeral Planning Authority5 regulates these payment plans.
Funeral plans offered by life insurance companies – with these; you own the life insurance policy. You agree that when you pass away, the payout will be used to pay the funeral director for the services you requested. These payment options are regulated by the Financial Conduct Authority6 (FCA) and covered by the Financial Services Compensation Scheme7 (FSCS) protection.
With life insurance-backed funeral arrangements you’ll not be covered for all the costs of your chosen services until after you’ve been paying into the plan for a specific period, typically one or two years.
Insurance premiums for these funeral payment plans are payable until you’re 90 years old or pass away. It means that you might end up paying more than the cost of a lump sum and instalment funeral plan, depending on how long you’ll live.
What Does A Funeral Plan Cover?
What’ll be included in a funeral plan varies from one plan provider to another and the type of funeral plan you choose. Some lenders will let you select from a wide range of options to create a bespoke service just for you, while others will offer you the most popular choices.
Not all funeral payment options will cover the cost of your funeral. It’s because some expenses aren’t under the control of the funeral director, for instance, medical and burial fees. In situations where the funeral plan doesn’t cater to these costs, an allowance will be established to cover them.
Some of the services covered in a funeral plan include:
- Guidance and advice on funeral arrangements
- Doctor’s fees
- Funeral director fees
- Coffin or urn
- Recording od special requests
- Collection and transportation expenses
- Care of the deceased until burial or cremation
- Minister’s fees
- Burial and cremation costs
Some of the services that might not be covered, depending on your plan provider include:
- Bereavement support
- Limousine procession
- Family viewing
- Transportation if death occurs when you’re on holiday or away
- Burial plot
- Headstone expenses
- Venue for the wake
- Catering for the wake
- Flower arrangement costs
It’s best if you checked in with your advisor or provider to know what will be covered. It could be significant to your funeral planning decisions – it’d help you figure out if it’s ideal for you and which provider to choose.
Pros and Cons of Funeral Planning
As with everything in life, funeral plans have various perks and drawbacks depending on what you’re looking for. Some of these include:
Funeral Plan Benefits
- Your loved one won’t need to finance all the funeral arrangement expenses
- You’ll lock in the costs of your funeral at today’s prices, thus avoiding any inflation implications
- You’ll take away any financial worries your family will have about planning for your funeral through making ideal choices for you today
- You plan for the service you want
- You get to make your wishes known – so if you don’t want a specific person to attend, they won’t crash your funeral service
- Anyone can take out a funeral plan despite any health issues since no medical is involved
- If you opt for a national plan provider, you’ll be able to move within the UK and have your funeral scheme moved with you
- You choose a funeral payment plan that works best for you
Funeral Planning Cons
- Funeral plans can be costly
- If funeral prices fall, you might end up overpaying for your funeral services
- Some schemes don’t guarantee all costs
- Most funeral plans aren’t currently regulated
- If you use an insurance-backed policy, you’ll have to go through a waiting period before you’re fully covered
- If you cancel your funeral plan, you might not get any capital back, or you’ll get less than what you paid in
- Most funeral plans don’t offer cover if you move or die abroad
- You need to maintain payments until the funeral plan is complete or you’ll risk losing it
Alternative to Funeral Planning
Using a funeral payment plan is the most common way of putting your provisions in place, but its not the only way to do it. There are options best suited for you, so you need to consider getting advice before settling on creating a funeral plan.
Some of these options include:
Savings and Investments
You can decide to use savings or ISAs8 to pay for your funeral. And, if you pay into it often, you’ll benefit from savings rates that increase the amount of capital you saved.
Paying from Your Estate
Funeral expenses can be paid for from your property after you pass on. Some financial institutions will release funds to cater to the funeral from your account if they’re given an itemized bill from the funeral director and a copy of the death certificate. If the banks, however, don’t accept this, your family will pay for the funeral themselves and get repaid when the Probate Process9 is complete.
If you’re entitled to any state benefits, you might be qualified for financial support from the government, and they’ll pay for your funeral. However, this won’t cover all the expenses
Are Funeral Plans Safe?
To figure out if the funeral plan you’ve chosen is secure, make sure that the funeral plan provider is listed with the Funeral Planning Authority. The FPA is an industry body with strict rules and regulations for funeral plan providers. It also helps in reassuring and protecting consumers purchasing funeral cover.
The cash you pay as either a lump sum or instalments are held in two ways, as an insurance policy that’ll be used to cater to the funeral expenses, or it’ll be invested into a Trust Fund with trustees. Both methods aim to protect your capital until it’s required, making sure that it’s used to give you the funeral services you requested.
Funeral plans that use the Trust Fund10 aren’t currently authorized or regulated by the FCA or the FSCS. Insurance-backed plans, on the other hand, are under FCA regulations and the FSCS covers your scheme.
It’s an insurance policy that helps you plan and pay for your funeral in advance. It aids in lessening the financial burden and stresses on your family.
Well, before you pass away, you have to ensure that your family knows you have a funeral plan and where you’ve kept the funeral planning documents. Therefore, when the time comes, they’ll know where to go to begin the necessary steps.
You can also opt to store the information in your will, with a trusted solicitor or bank of your choice.
Some of the questions you need to ask your plan provider include:
- Are there any cancellation charges?
- What’s included in the funeral plan and what potential expenses aren’t?
- Are there any other costs for the funeral and what happens if there are?
- Is it possible to cancel your plan if the circumstances change, like if you arranged for your spouse’s funeral but later separate?
- Does the funeral plan permit you to choose the funeral director?
- What if the funeral director goes into bankruptcy and is forced out of business? What will happen to your plan?
- Do you have the freedom to change the details of your funeral plan?
Well, funeral plans are intended to be bought and remain in place for the rest of your life, but sometimes the circumstances change and might need to cancel the funeral plan.
The good news is that you have the right to cancel it. However, what happens next will depend on the funeral plan you have and the plan provider you choose.