RIP: Your final financial plan
First published 15 May 2017 • Updated 24 January 2018
One of life’s biggest decisions is what happens at the very end of it – and it’s the one we least like to talk about. But with burial and cremation costs not only rising but subject to a postcode lottery, planning here has never been more important.
It’s often said of money that you can’t take it with you. And yet, when you do finally depart to the great hereafter, it’s surprising how much of your money can disappear too. One cause of this may be inheritance tax, which affects more people every year. However, another significant cost can be funeral expenses, which tend to appear at short notice and so can be even more difficult for your loved ones to meet.
New research from Funeralbooker reveals that fees for burial and cremation in the UK have soared recently. The average cremation fee is now £753, while burial now costs an average £1,792. What’s more there is huge cost variation across the UK, with cremations in some regions costing 104 per cent (or £509) more than other areas, while burial costs can vary by up to 7,000 per cent. On average costs have risen by an inflation-busting 5.1 per cent, but some councils have far exceeded this with hikes of up to 30 per cent on cremation fees since last year.
James Dunn, co-founder of Funeralbooker, likened the rises to a ‘stealth tax’ and suggested that in some cases they might be ‘opportunistic’. He commented, ‘If these costs continue to climb, families will struggle and we will see funerals causing even greater hardship and stress. Cremation and burial fees are almost entirely unavoidable, but families can protect themselves by planning ahead. It’s also worth remembering that independent funeral directors typically offer better value-for-money and a more personal service than the big chains, so it’s definitely worth going online to shop around.’
Planning ahead for funeral costs
Pre-paid funeral plan
In effect, a funeral plan lets you pay towards your own funeral in advance. Typically a plan will cover only some of the costs (such as the burial or cremation costs specifically) so check with your provider to be sure exactly what is included. You can pay into plan over a period of several years, so that by the time of your funeral the bulk of it is already paid for. Make sure that the relevant member(s) of your family know about the plan, and where the documentation is kept.
An independent financial adviser can find the most cost-effective plan on the market to suit you.
Some forms of life insurance can be set up to cover funeral expenses. An over-50s plan can pay out a fixed lump sum specifically to cover this cost. However, talk to your financial adviser first to see if this is likely to be more cost-effective than simply putting the payments aside as savings or investments. One advantage of an over-50s plan is that it doesn’t require a medical screening, making it potentially more affordable than ordinary life insurance if you have a medical condition.
Paying from your estate
It’s good to know that your family can also pay for your funeral using money from your estate. Most of your estate will not be released until the probate process has completed, which takes on average six to nine months. But if your family present your death certificate to your bank, along with an itemised bill from the funeral director, the bank will usually release these funds straight away. However, this does depend on you having sufficient cash held in savings.
Despite this useful facility, don’t neglect to make a valid will so that your estate can be released to your family as soon as possible. This can help to mitigate the impact of any inheritance tax and other possible costs (such as upkeep of any rental properties you may have owned). Use the Unbiased search to find a solicitor to help you with this.
We all avoid thinking about funeral costs, simply because we don’t like to think about dying. So it’s better to think about trying to make life as easy as possible for your family, as you always have done. That way you can be sure that while they’re missing you, they’re not also missing a large chunk of their savings.