We didn’t use to like funeral plans. We took the view that managing our clients’ money as we do, we should be able to leave them with ample funds in their bank accounts and/or investments as to take care of a decent send-off. We also had concerns as to the security of any funds invested. In simple terms, we wanted to be absolutely sure that if a client of ours bought a funeral plan it would pay as promised when the need arose. We’ve never recommended an investment that has subsequently failed and we didn’t want funeral plans to be a first. Times have changed, however, and experience has led us to reappraise the value that prepaid funeral plans offer. Six key facts led us to this view:
- The cost of the average funeral has tended to rise faster than inflation. Paying now is, therefore, a good long-term investment.
- We’ve come across too many situations where the children of a deceased client are not equally wealthy, where one can afford the share of the deceased’s costs and the other can’t. We’ve seen this result in the kind of family arguments that permanently impair siblings’ relationships. The way we see it, most parents do want their children to get along well with each other after they’re gone. The less there is to argue about the better, especially where finances are concerned.
- Paying in advance for a funeral plan reduces the value of the deceased’s estate when it comes to calculating any Inheritance Tax liability.
- Paying in advance means there’s less money for the local authority to get its hands on if the client has ended his or her days in a nursing home. Local authorities are becoming ever more aggressive in extracting the maximum amount of cash from those who are forced to go into nursing care.
- The money is there when it’s needed. Estates take time to settle but funeral directors normally want to be paid within 28 days of their services having been rendered. With a prepaid funeral plan, the bereaved aren’t faced with the sudden need to find the money for their loved one’s final expenses.
- We finally found a provider where the money was really secure. With that concern laid to rest – humour entirely intended – we decided that the right funeral plan could offer significant benefits to our clients.
Choosing the Right Plan
Ideally, use a provider where all monies paid over are held in a Trust which is, legally, a discrete financial entity run by a board of independent trustees. That way in the event that the plan marketer went bust, your money would be safe.
Costs and Benefits
Standard plans usually start around £3500 and include the coffin, transportation of the deceased to a suitable resting place, pre-burial care, the chapel of rest costs, a hearse to a local cemetery or crematorium and an allowance to pay for an officiant e.g., clergy, with an allowance towards third-party costs such as cremation or burial fees. More upscale plans will include things like cars for mourners and family. More basic options are also available.
What is Not Covered
Funeral plans won’t cover transport back to the UK if death occurs abroad, so always make sure you have adequate travel insurance. Nor will they cover the purchase of a grave plot or monument.
A Good Investment
If in 2004 a client had invested £1920 (then the average cost of a funeral) in a bank or building society it would have grown to around £2500 over the next 16 years. By contrast, the average funeral cost has increased to around £4400. Good funeral plans have in effect achieved better returns than cash on deposit and are just as safe.