Funeral Costs and Expenses

How to Pre-Pay a Funeral

The National Funeral Directors Association states that the average cost of a “regular adult funeral” (funeral with embalming, viewing and a metal casket) is now $7,300. This sum does not include a cemetery plot, grave marker, flowers or obituary notice.

There’s plenty of grief and stress right after a loved one dies without having to worry about where the seven grand is going to come from to pay for the funeral, not to mention associated expenses like travel, meals, and time off of work. If you’re planning a “regular” funeral you’d be kind to those who love you to plan and provide funding for your funeral.

There are five major ways to finance a funeral ---

1 Purchase funeral insurance from an insurance company
(known as Final Expense Insurance, Burial Insurance, Funeral Insurance or Poor Man’s Will Insurance.)
Usually a policy worth between $3,000 and $15,000, payable to a named beneficiary immediately following the insured’s death. The funds are not subject to probate. The money is intended to cover funeral expenses but can be used in any way the beneficiary wants.

Find out more about Funeral Insurance.

2 Purchase an insurance policy or trust through a funeral home
This option involves planning and funding exactly what funeral home, what services and what products will be used for your funeral. Only the products and services provided by the funeral home are included in the plan. Outside vendors such as the local newspaper’s fee for the obituary notice, the florist’s fee for floral arrangements, the clergy’s fee for officiating the service and the cemetery’s fee for the grave opening and closing are all considered outside the funeral home’s control and are not included.

The plan is funded either by the purchase of an insurance policy or trust instrument through the funeral home. The funeral director acts as an insurance agent and receives a commission on the sale of the policy or a fee for setting up the trust. The beneficiary on the insurance policy and trust is the funeral home.

3 Purchase a Life Insurance policy from an insurance company
Any life insurance policy can be used to pay for a funeral. You can buy any term or whole life policy and instruct your beneficiary to use a portion or all of the death benefit for your funeral. Standard term and whole life policies, however, aren't offered in low face amounts like $5,000, which is why funeral insurance policies can be handy if you need insurance money only to cover funeral expenses. At your death, the money passes automatically to the named beneficiary without having to go through probate The money is intended to cover funeral expenses but can be used in any way the beneficiary wants.

4 Set aside money in a joint savings account
Saving for funeral expenses can be effective if the account is a joint account and the survivor on the account is responsible for paying for the funeral. When a joint account exists, the assets contained in the account are still readily available to the other individual listed on the account. This means that a surviving spouse, partner, or child will have access to at least some funds while the estate of the deceased is settled. A savings account to pay for a funeral is not usually recommended. Savings accounts accrue interest and you’ll need to report this on a 1099 form and pay taxes on it. Furthermore, there is the self-discipline issue of regularly depositing money into savings and avoiding the temptation to draw from the account to pay for things other than a funeral.

5 Set up a individual Payable on Death (POD) account at your local bank
(Also known as “Informal Trusts” or “Totten Trusts”)
Payable on death accounts are widely used to set aside relatively small amounts of money (less than $15,000) for anticipated funeral costs. You simply open an individual savings account or certificate of deposit with your local bank and name a beneficiary. During your lifetime you have total control over the account and complete access to it. However, at your death, the money passes automatically to the named beneficiary without having to go through probate. The money is intended to cover funeral expenses but can be used in any way the beneficiary wants.