This is the second of three blog posts on the topic of Estate Management. I’m certainly no expert in this field but I’ve been very interested to learn more about it. My blogs have been inspired by the charismatic Julian Bright from Bright Insight Ltd, a firm of estate planners.
Today’s article is on Funeral Plans, after I covered Powers of Attorney last week, and before Wills next week.
As before, my question for you is, can you afford not to read and take action?
Funeral plans – planning with the end in mind
Whether we want to think about it or even admit it to ourselves, we will all need a funeral sooner or later. Hopefully later for the majority of us, but we’ll never know for sure!
“In this world nothing can be said to be certain, except death and taxes.” Benjamin Franklin
If this isn’t depressing enough, the cost of funerals has increased at an average of 12% p.a. over the past 10 years, with the average cost now around £5,000. The cost of your funeral will typically come out of your ‘estate’ (assuming there’s enough money to cover it) or it will fall on your nearest and dearest to cover it.
Even assuming funeral costs will be covered by your estate, the funeral directors will want their money well before most inheritances get sorted, so someone will end up having to pay the funeral costs in the meantime. With 1 in 4 UK adults having no savings, this level of cash isn’t always immediately available, and credit cards or loans are sadly often required to foot the bill.
Is this a burden you’d want to put on your loved ones?
Alternatively, funeral plans offer you the opportunity to pay for your funeral while you’re still alive. You can also have a clear say in the type of funeral arrangements you want.
There are several benefits of having a funeral plan:
- you pay for it, rather than having to burden your relatives at an often-difficult time
- your family doesn’t have to second guess your wishes around the funeral arrangements
- it can give you and your family peace of mind, which can be invaluable
- it’s paid for at today’s prices and should be protected from future inflationary rises
- as this is paid for up front, it won’t form part of your estate, a potential saving from an inheritance tax perspective
Once you have put your funeral plan in place, the providers issue a certificate that detail all the essentials and your entitlement. At the time of your death, your family simply visit the nominated undertaker who will also have their own records of the pre-paid provision.
It really is as simple as that.
Who can have one?
Anyone over 50 can start a funeral plan.
If you’re under 50 you can of course already think about it and start putting money aside. You just can’t register for a plan until you turn 50.
According to the Funeral Planning Authority, there are approximately 1.4M live plans in place, with approximately 200,000 new ones each year. The number of draw downs are not increasing as much meaning the number of live plans grows.
However, this represents only 6% of UK adults with a funeral plan. This rises to 13% for the over 55s, but there is a lot of variation in terms of age, gender, geographical location and marital status.
One of the most noteworthy stats is that 30% of widows have a plan in place, probably based on the personal experience from when their spouses passed away.
How do they work?
There are several different models.
You can either pay in a lump sum – advisable to just pay this if you have the money – or you can pay monthly. However, for any plan it’s essential to check the conditions to make sure that you’re aware and comfortable with what’s included and what’s not.
Your own financial circumstances will dictate which method is more appropriate for you and your family.
Who can arrange them?
Funeral plans can be arranged with Estate Planners, Funeral Planners or directly with Funeral Directors.
As with many financial products and services, from time to time there are the inevitable horror stories in the media around some of the plans, especially the monthly payment plans.
Sometimes, plans have not turned out to be as ‘comprehensive’ as envisaged, leaving some costs still to be paid at the time of the funeral.
It’s critical to fully understand what you’re signing up for as different schemes include and exclude certain elements that you may think would be included, such as burial plots.
My advice, as always, would be to seek out and deal with a reputable person who deals with a few different companies to avoid these risks. They can guide you through the process and help you find the plan that suits you best. With reputable companies, the plans are underwritten, and fully bonded through ringfenced insurance policies.
As well as the potential cost saving and the peace of mind, a funeral plan enables you to clearly detail (should you so wish) what you would like to happen at your funeral. You can specify songs, hymns, music, poems, readings or even things such as what people should wear (bright clothes please!), tributes (family flowers only), or which charity you may wish to benefit from any collection.
The only sure way of detailing this, is through your funeral plan. Without this, it will either beleft to chance or for your next of kin to either have to second guess or make decisions that are contrary to what you’d like.
If your family are really struggling to cover the costs there may be some financial assistance available from the government. However, this would only be for a very basic funeral and only applies to those on certain benefits.
- Income Support
- income-based Jobseeker’s Allowance
- income-related Employment and Support Allowance
- Pension Credit
- Universal Credit
- Housing Benefit
- Working Tax Credit which includes a disability or severe disability element
- Child Tax Credit
Aside from this, you or your family would need to foot the bill for your funeral.
Do I have a funeral plan?
I don’t yet, as I’m under 50. However, as a planner by nature, I have already thought about what I’d like to happen at the end of my life. I may make some notes to include within my will at this stage as I’ll be updating this in due course.
I’ll also probably give it some more thought when I turn 50. Like many things in life, the sooner things are considered and dealt with the more you can then forget them, and it’s also possible to save money in the long run too.
Funeral plans offer you the opportunity to pay for your funeral while you’re still alive, removing financial burden from your family at a difficult time. They also offer you a clear say in the type of funeral arrangements you want.
Thank you for reading! For more on Age Life Balance, browse the blog at www.agelifebalance.com to find out more.