Finances are a difficult subject to talk to family about in the best of times. Add death to the discussion and it’s no reason why virtually nobody talks about it until there is no choice.
Personal finance decisions are best made when things are calm. Once emotions become involved poor decisions are sure to follow. And nothing heightens emotions more than the death of a loved one. At their weakest moment they are required to make choices that can cost $10,000 or more. A lifetime of planning for retirement and financial independence can be strained due to an untimely death.
Planning ahead allows loved ones to focus on the grieving process. With decisions, and expenses, handled in advance, a funeral doesn’t have to break the budget.
Before we start the planning process, know this isn’t about being cheap. I’m not recommending digging a hole in the backyard or a pine box (though the pine box isn’t always a bad choice). You can fulfill religious obligations and personal preferences without saddling those left behind with burdensome debt or reduced savings.
Tips of Comfort
There are rules in place designed to help you deal with funeral needs. We’ll get to those in a moment. We’ll address the rules protecting you and provide reasonable and suitable alternatives to traditional funeral services. There are several links throughout this post I encourage you to explore. I also included some examples available from Amazon. Knowing the rules and planning in advance can cut the average traditional funeral cost (currently $7,000 to $10,000 in the U.S. and Canada) in half or more without sacrificing a thing.
Tip 1: Embalming is optional. The United States and Canada are the only two countries in the world that routinely embalm their dead.1 Funeral homes may have a policy requiring embalming, but it is not a legal requirement! Embalming does help in presenting the body if there is a showing. If you opt for direct cremation there is definitely no need to embalm. Refrigeration slows decomposition the same as embalming attempts to do without the environmental issues or cost.
Embalming is used to preserve the body. However, no amount of money spent on embalming, a sealed burial vault, et cetera, will prevent deterioration of the body indefinitely.
Now is the time to talk about your wishes. There may be religious considerations as well. Embalming, along with dressing and preparation for the showing has a wide cost: $500 – $1,300. For a family on a budget this can make a difference.
Tip 2: You don’t have to buy the casket from the funeral home. I started this discussion with embalming because it is optional. But the casket is usually the largest expense. Since caskets have a massive markup—typically 300% or more—the funeral home is motivated to sell you the best ride home for your loved one. Except more isn’t better.
Caskets can cost anywhere from a couple thousand dollars to ten thousand. However, Amazon sells caskets for a lot less! And the funeral home cannot refuse to use a third party casket.
The funeral home must show you a price list of all the caskets they sell up front. They will want to point you to a higher cost casket, but once the showing and service are over the casket is buried. A lower cost casket does the same exact thing as an expensive one!
The Funeral Rule (discussed below) governs funeral homes only! Cemeteries have few if any regulations and rules governing them. Therefore, the cemetery may require a burial vault or liner. This helps prevent the ground from settling so clipping the lawn is easier. As always, you are allowed to shop elsewhere for a burial container. The easy purchase from the cemetery is usually the most expensive.
The headstone is another large expense you can buy from Amazon and other sources less expensive than most options provided to the bereaved in their most vulnerable moment. If your loved one is cremated you can purchase an urn for under $50 at Amazon.
Tip 3: Funeral homes are required to give quotes over the phone. This makes it easy to compare prices. Whether you planned in advance or a loved one just died, you can find the best options quickly from home. Be sure to inquire about the funeral homes policies on embalming.
Tip 4: Prepaying funeral expenses is a bad idea in most cases. Prepaid funeral plans are a gift to the funeral home. The funeral home has a guaranteed client with a guaranteed minimum budget. Insurance plans outside the funeral home encourages less than frugal decisions.
When my father-in-law was alive, but in poor health, my mother-in-law insisted on a prepaid funeral plan. She asked the four children (all adults) to contribute $3,500 into the plan. Since my mother-in-law gifted a similar amount to all the kids years ago it was decided it was the right thing to do. I disagreed, preferring to pay for the funeral with frugality in mind and the rest going to my mother-in-law to help her financially. I was voted down. When my father-in-law died the funeral trust was used to pay for expenses. There was $14,000 in the prepaid plan. Guess how much the funeral cost? And well over the average cost of a funeral on a national and local level.
Tip 5: Cremation is a viable alternative. Cremation costs average just over $1,000 and eliminate the need for embalming, a casket (you can rent a casket for the showing) and cemetery costs. The cost of cremation is lower in many parts of the country so it pays to research the option in your area.
The Funeral Rule
The last thing you think of when you are blindsided by the loss of a loved one is the rules protecting you. The Funeral Rule has a long list of protections administered by the Federal Trade Commission. I’ve included many protections from the rule in this post, but encourage you to read the numerous protections yourself. Be sure to read both pages at the FTC link provided.
The Funeral Rule is a perfect way to plan your final financial decision. It is as important as a will. Probably more so.
Building a Funeral Plan
The best time to plan your funeral is now. Avoiding the issue only leaves the decision to family members when they are under great stress. You want your family to deal with their grief instead of making serious financial decision when you die, right? Poor financial decisions are certain to be made if you don’t plan ahead. And your family and friends have no way to carry out your final wishes if you don’t detail your final wishes!
The FTC link above has a Funeral Pricing Checklist. I encourage you to print out a copy. Leave a blank copy with your papers so price shopping is easy for the family.
Step 1: Talk with your spouse, children, family and friends. It is vital to begin a dialog with all interested parties. A significant other should be involved unless there are extenuating circumstances. Your children should be aware you have a funeral plan and where the plan is so they can easily retrieve it when you die.
Things to consider:
1.) Do you want a burial or cremation? Immediate cremation means there is no showing. This is the cheapest option, but the least preferred when family is involved. Tradition might also play a role. Cremation is more common in certain parts of the country; burial in others. There could be personal preferences.
2.) If you wish a showing, how soon do you want it? This is an important consideration if you are going to buy a casket from Amazon or some other source. It takes time for delivery. Refrigeration allows for a delayed showing, providing plenty of time to arrange every facet of the funeral appropriately. There is no need to rush.
3.) If you choose to be cremated, do you want your ashes scattered in a place meaningful to you or do you want family members to have an urn with your remains?
4.) Choose where you want to be buried. The one thing you can do in advance without much risk is deciding which cemetery you wish to be laid to rest. Plots can be purchased in advance; headstones, too. Religious reasons my play a role in your decision. Consider where other family members are laid to rest.
5.) Understand funeral prices in your area. It is a good idea to visit a few local funeral homes to get their price list of services as a planning guide. Keep the price list of the funeral homes you wish loved one to consider. Be sure to list preferences if you have any.
6.) Have a backup plan. Prepare contingencies should you pass will traveling abroad.
7.) Inform your children of your plan and where it can be found.
8.) Start your own funeral trust. In this case I’m NOT talking about the traditional funeral trust set up with a cemetery or funeral home as beneficiary. This is what my mother-in-law wanted and it harmed her financially. I’m also NOT talking about funeral insurance. What I am suggesting is a non-traditional way to fund your funeral without everyone having their fingers in the cookie jar. You can always set aside an amount in a separate account designated for future funeral expenses. However, a lawsuit or other legal action could claim your personally designated funeral funds. A better idea is a trust you set up with your attorney. Laws are different from state to state so I will not get into details. What I will say is that you want to be careful you don’t set up an irrevocable trust that requires an annual tax return. When planning your estate (will, living will, et cetera) is a good time to discuss secure funeral funding options so family isn’t burdened from your passing
Step 2: Save a copy of your funeral plan in a safe place and with either your attorney and/or accountant. A lot of time can pass between plan and execution. At least we hope. You never know when your final hour arrives so building a funeral plan today is the best choice. Still, the plan is worthless if nobody can find a copy. Because the document can be misplaced or destroyed by fire or theft you should always have an additional copy with your legal and tax professional. Be sure to inform all family members, clergy and friends where a copy can be found.
In my office all clients, past and present, are provided free digital storage of important documents. Our system is protected by a firewall, encryption and with multiple daily backups to a third party off-site. I would inquire with your accountant and attorney to assure you are provided these minimal protections of your important documents before turning them over.
The reason I offer the service to regular clients for free is because the cost to me is so small. Scanning the documents into our system is about the only expense we have. Our data storage capacity can easily handle a few additional documents from clients.
Now that you have your funeral plans in place, protecting loved ones in their darkest hour, you can plan for a long and happy life with said family and friends without worry over what happens when you are gone.
Note after publication:The link is added here now that I have it working. I wanted to use the funeral.org resource when writing this post but had difficulties linking. Please review the comments on the funeral.org resource.
1 Living Rich by Spending Smart: How to Get More of What You Really Want / Gregory Karp, FT Press 2008; Page 186
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