Preparing for funeral expenses

The obvious solution is life insurance; if a sensible level of cover has been bought the lump sump payable on death should more than settle the most lavish of send offs! This life insurance policy should be written in trust (a facility that may not be available with mail order policies or at supermarkets) so that the named recipient can gain access to the funds without waiting for probate to come through. The funeral director's bill invariably arrives before probate is granted.

If there's no life insurance, and no other funeral plan, then hopefully you've left behind some monies in the bank or building society. Even if such accounts have been frozen following death it may be possible to release funds on evidence of your death certificate.

If, shamefully, youve left absolutely zilch, then your friends and relatives will have to pick up the tab. Certain organisations and professions do include death grants in their pension and employment conditions, but there is no general state grant except, possibly, for the funeral arranger living on means-tested social security benefit.

The last big expense of your life is something that can't really be laid off against the credit card unless you've had the foresight to purchase the service in advance. Otherwise, given that you are in no fit state to sign a card slip or a personal cheque, your funeral costs will be funded by your estate.

The rising cost of dying

The expense of the final farewell can vary enormously, depending on such matters as location, repatriation, nature of service (six or twelve black horses per hearse?) and longevity of the party afterwards (drinks bill!). A 'normal' funeral costs around £1,400 to £1,700. However it is said that the cost has historically increased above the level of inflation and this trend is predicted to continue; a funeral costing £850 ten years ago would now be nearer the £2,000 mark.

These rising prices are, of course, emphasised by the various companies offering upfront funeral plans. But to be fair such plans do relieve grief stricken and/or angry relatives of much of the administrative burden entailed in arranging the funeral.

You, while sound in mind and body, can dictate all the requirements of your internment or cremation, the hymns and music you want played (no, not Queen, please), number of vehicles, marching bands etc. All organised and paid for (one-off or monthly instalments) at today's prices; if you don't depart for, say, another ten or fifteen years, then theoretically you're quids in, because every detail is guaranteed no matter when it is needed or how much the costs of a funeral have risen in the meantime.

The fact that you will not be around to check this guarantee could be viewed as a minor flaw. Whatever, the various funeral plans on offer can be checked out online (eg Golden Leaves traditional prepayment funeral costs £1,910) but you might feel that £2,000, invested wisely, would generate a better return over ten years than the savings made against inflation.

A century ago, people saved with friendly societies for such essentials as a decent burial and financial protection against sickness and ill health. In 1945, before the welfare state kicked in, there were 18,000 societies/branches serving some 14 million members; today there are around 200 left.

Friendly societies are now best known for their tax exempt savings plans. You may invest up to £270 per year for a minimum of ten years; the money is typically invested in a with profits fund and the proceeds paid out tax free at the end of the term. However, performance differs greatly between friendly societies; experts say invest according to normal rules, dont be swayed by the tax-exempt angle.

22 July 2005 © Moneyextra.com

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