Things we don’t want to talk about 101 - Funeral Plan Advice

Things we don’t want to talk about: 101 - Funeral Plan Advice

A client of Dales Independent Financial Advisers recently asked for some advice on a funeral plan. It made me think about my own experience a few years ago on the death of my Farther in Law, what is available, what are the benefits and who needs to consider such a plan.

First things first: just how much does it cost to die in the UK these days?

On average it costs anywhere between £2500–£5000, depending upon either, where you live or how basic the funeral is. From my personal experience, for the most basic funeral in the south of England with no wake, no trimmings and no limousine it cost us around £5000, two years ago. In the Midlands, i.e. Newark or Nottingham for the same funeral you may expect to pay around £2500. Adding a limousine, a small room for the wake, and you would expect to pay closer to the £5000 mark.

Who pays for the funeral?

In the first instance the deceased estate is responsible for the cost. The cost of the funeral, is the first call on the estate (this means that before anyone else can get their inheritance or costs, the funeral director gets they’re money), however probate will still need to be granted to make the payment. Therefore, as probate can take some time the next of kin will be expected to make payment to the funeral director before probate has been granted.

If the deceased has insufficient resources to pay for the funeral from the estate, it is the responsibility of the next of kin to pay for the funeral.

Can you get any help with funeral costs?

The simple answer is, if you have any money probably not. Similarly, if the estate of the deceased has any money no probably not either.

However, if you have no savings, and are claiming income support or similar benefits you may be able to claim some help as an interim payment for the funeral, until the estate’s funds are released, if the estate has sufficient money you will have to pay the council back once probate is granted.

The only situation where the local council would be expected to pay the full costs of the funeral is where the deceased has no next of kin, with sufficient funds, and no assets, or personal belongings that may be sold to cover the costs of the funeral.

It is important to point out that if the next of kin have sufficient funds to cover the cost of the funeral, then the council will not be liable for the funeral, you will have to pay, even if the estate has insufficient funds to reimburse you.

In my mind this means that most people will have to pay for their own funeral, or their next of kin will be expected to. With this in mind many people over 50 start to consider the issue.

Covering the cost of the funeral

There are a number of ways to consider how one pays for your own funeral: You could leave sufficient funds in a savings account. The main disadvantage is that the funds will not be accessible by your family until after probate has been granted. Consider for a moment whether or not, your son or daughter may have as much as £5,000 in a savings account to cover the cost until the estate is released.

Some people consider life insurance (assurance), this can be an inefficient method, as a lump sum is insured not the cost of the funeral, as we discuss later the cost of funerals keeps increasing, therefore the lump sum may not cover the cost in the future.

Notwithstanding that - if you do use this method please take advice on placing the policy in trust, otherwise you may not have alleviated the issue of access to the funds on death.

The other method and probably the best is a pre paid funeral plan.

Funeral plans: how do they work and why should I get one?

Most funeral plans are a way of pre-paying for your funeral, with some you can select various options e.g. you could elect to cover limousine high. Most cover the cost of a cremation, but again you could elect to cover the cost of burial. The basic premiss is that they guarantee to cover the cost of the funeral. This makes a lot of financial sense, the price of a funeral has gone up considerably over the years, between 2004 and 2009, the rate of increase has been higher than inflation or savings account interest at 7.32% per year. (source|: Mintel). Usually the money you have paid is held in trust for you, this puts the value of the plan outside of your estate, so there is no Inheritance tax issues or indeed probate requirements. Therefore, your nearest and dearest can access the funds straightaway.

Funeral Plans: Where Can I Get One?

There a number of suppliers available, some may have restrictions on what funeral director you can use and some may have limited guarantees or options, the point is that it is important to get the plan that best suits your needs.

Traditionally these plans are something one buys without any real advice, most people who buy one go through a local funeral director, and are not aware that you can get independent advice on which funeral plan is best for you.

Dales Independent Financial Advisers can help you chose the right funeral plan for your circumstances. Although the sale of funeral plans are not regulated by the Financial Services Authority, they have issued guidance on funeral plans. We use this guidance, consider your circumstance and requirements, then review the market and find the plan best suited to your situation.

For more advice on Funeral Plans contact Philip Dales Cert PFS Cert CII MP at Dales Independent Financial Advisers: advice@pndales.co.uk. We have offices in both Nottingham and Newark, and would be happy to discuss your situation in more detail.

Call us today to discuss your requirements. Nottingham: 0115 832 0265 or Newark: 01636 87 00 69 or email advice@pndales.co.uk or look at our website www.dalesindependentfinancialadvice.co.uk

The Financial Services Authority do not regulate Funeral Plan advice.

Mortgage Update - New capped rate

Market leading Capped Rate Mortgage Launched

In these uncertain times, most people don't seem to know which type of the mortgage deal is the best to select.

With Bank of England interest rate so low most people assume that interest rates will, sooner or later increase. However, the issue with a fixed rate product is that if the rate does not increase or only increases a little and then remains static. If you had chosen a fixed rate there is a possibility that you may be paying above what you need to. This has its advantages, the security of knowing what your payment will be may be worth the extra in payments.

With a Bank of England tracker mortgage your mortgage increases or decreases with the ups and downs of the Bank of England interest rate. Therefore, if as outlined above people feel that interest rates will increase, then the payment on this style of mortgage will increase. However, if you don't feel that interest rates are going to increase straight-away or increase only a little and then stall, then this method would appeal. The only problem with this is that what if your wrong and interest rates just go up and up.

So both basic types of Fixed or Tracker rate products have their limitations:

The Third Way!

A Capped Rate:

This is a mixture of both products, it is a tracker mortgage, but it can not go above a specified rate - the cap. So you benefit while interest rates are low, and if they increase a little you are still generally speaking better off than a fixed rate (at the moment) but if the Bank Rate increases above the Cap you are in-effect on a fixed rate, during that period, because if the Bank rate falls you would also fall again. In my view this is the best of both worlds.

Limitations: Caps sometimes have collars, this is when the interest rate charged can not go below a specified interest rate, recently it has become more common for Cap mortgages to have collars, you should always check the Key Facts document for full details on any Collars.

New Deal Launched.

3.99% tracker (Bank of England + 2.49%) until 30.06.12 Capped at 3.99% until 30.06.12

Maximum Loan to Value - 65%

Incentives - One Free Valuation

Remortgage Transfer Service included

Early repayment charges - only during the benefit period (4% to 30/06/12)

This is only one Capped product, it does not suggest that it is the best product for your needs, DALES can review your circumstances and make a recommendation suited to your needs. For Mortgages DALES offer an advice and recommendation service, and recommend products from the Whole of the Market.

For more details of this or other mortgage products or to arrange a free consultation please contact tel: 01636 642 844 or email advice@pndales.co.uk

Your Home is at risk if you fail to keep up payments on any mortgage or loan secured against it. P N Dales Ltd is Authorised and Regulated by the Financial Services Authority 496107.

2010 Budget Update

Stamp Duty

The finance bill 2010, will introduce a temporary relief from Stamp Duty for first time buyers up to the value of £250,000. To clarify: all parties to the purchase must be first time buyers, and it must be as a main residence. A first time buyer has also been defined as someone who has never purchased a property before anywhere in the world.

The finance bill also introduces a new rate band of stamp duty on properties over £1 Million these will now have to pay 5%.

New Anti-avoidance legislation will also be introduced to target those who currently exploit the partnership rules to artificially reduce the duty payable on land transactions.

• First time buyers no stamp duty on purchase of main residence up to a value of £250,000
• 5% Stamp duty on property over £1 Million

Income tax & National Insurance

Confirmation of the incoming 1% increase in NI from April 2011.

Also confirmed those earning over £150,000 will pay additional 10% from 6^th April 2010, this increase will also apply to many trustees, personal allowances will be restricted for individuals earning over £100,000 from 6^th April 2010.

• Increase in higher rate tax to 42.5% for dividends and 50% for other income from 6^th April 2010 for those earning more than £150,000 and certain trusts.
• Those earning over £100,000 will lose part or all of there allowance in 2010/2011, a reduction of £1 for every £2 of income over the £100,000.
• Lower limit on NI will increase by £570 in April 2011.
• NI to increase by 1% from 2011/2012

Corporation Tax

Rate remains 21% from 1^st April 2010 to 31^st March 2011; the increase for companies with chargeable profits below £300,000 has been deferred again!

Inheritance Tax

Frozen at £325,00 (each or £650,00 for married couples) for 2010/2011 and the next 4 years – overriding planned increase to £350,000 as in the budget in 2006.

Pensions

• Tax relief for those earning over £150,000 will have their tax relief restricted.
• Those earning over £180,000 will be restricted to 20% tax relief
• The relief will be based on 1% withdrawn for every £1,000 of gross income above £150,000
• Life-time allowance of £1.8 Million and the annual allowance of £255,000 are frozen up to 2015/2016 tax years.

Life Assurance Policies

Deficiency relief.

A complex system whereby if you have in effect overpaid tax on any gain made by a life assurance contract, you are entitled to relief.

• New Anti-avoidance provision

Essentially, in certain circumstances you could over claim, this little loophole has been closed.

Investments

Venture Capital Trust Schemes and Enterprise Investment Schemes

The geographical scope of the schemes will be expanded from UK to include shares listed on any EU regulated market. In addition, the minimum holding of “eligible shares” within the VCT will increase from 30% to 70%, however, the definition will be expanded to allow VCT’s to include shares with preferential rights to dividends.

• May now comprise shares listed within the EEA
• Minimum Eligible shares up to 70%, and definition widened
• Qualifying trade relaxed to company must simply have a permanent establishment in UK

ISA’s

• Annual Allowance will increase with RPI from 6^th April 2011 (based on RPI for the September before the start of the tax year) the limit will be rounded to the nearest £120.
• The Cash allowance will remain at half the value of the Equity ISA limit after indexation.