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.
