What are prepaid Funeral Plans... and are they worth it?
Loosing a loved one is never easy, add to this the rising cost of funerals (which now average £4,300) and the aftershocks can be considerable.
More and more people are now opting for prepaid funeral plans so they know the majority of costs are taken care of before they die.
It's important to ensure your family are not left to foot the hefty bill, and an already difficult time for them.
Here at Newlife Wills we will help you work out a plan that is right for you...
A fifth of all UK funerals are now paid for in advance via a funeral plan, which leaves your family with less financial and/or organisational responsibility when you die.
Plans allow anyone over the age of 50 (18+ with some plans) to pay for and set out the arrangements of the major components of your funeral now – eg, hearse and ceremony – so you can guard against rising costs. However, they do have their pitfalls, so here's all you need to know.
Top 10 Need to Knows:
1. Beware of dodgy companies mis-selling plans
There have been reports of widespread mis-selling in this industry, with vulnerable people being cold-called and pressured into buying over-priced plans not right for them, with unscrupulous companies taking a hefty chunk of anything paid into a plan as commission.
2. What is usually covered in a Funeral Plan?
Many providers will let you choose a cremation or burial funeral plan. The initial costs are similar, but watch out for costs that won't be covered.
What's usually included:
Transport of the body to the funeral director's location
Care of the body
Visiting the body in a chapel of rest
A coffin, hearse and funeral director personnel
What's sometimes included, depending on the plan:
Doctors' fees (totalling £164 and needed for cremations outside Scotland)
Minister's or celebrant's fees
Limousines for mourners
Complete fees for the crematorium
What's generally not included in a funeral plan:
Buying a burial plot (this can cost £1,000s) and some burial fees
Flowers, catering and other costs for a wake
A head stone/memorial
Always check exactly what is and isn't included in the plan before you buy, as every plan has its differences.
3. Plans can guard against inflation and rising prices
4. Is a Funeral Plan worth it?
If you have the money to pay for a funeral plan now and you're the sort of person who likes to be in control of things, while at the same time taking the pressure off your family when the time comes, both financially and emotionally, then a funeral plan is an option to consider.
5. Your money isn't protected like a savings account
The key thing to understand about this market is it is not regulated. This means your money isn't protected like in a savings account – where the first £85,000 is protected in the event of the bank or building society going bust – although discussions are ongoing to see whether this is an option.
6. Cash paid into a funeral plan is sheltered from the taxman and care home fee evaluations
One bonus of a funeral plan is that, once paid for, it isn't counted towards your estate, so it's excluded from inheritance tax charges when you die. If instead you'd chosen to keep money aside in a savings account to pay for your funeral, this does form part of your estate and is included in the total value of your estate for inheritance tax purposes.
7. There are 4 ways to pay for your funeral plan
8. Tell your loved ones you have a funeral plan
When you die, whoever is looking after your estate will need to notify the funeral plan provider or your nominated funeral director who will arrange and pay for the funeral, so it's important you tell people you have a plan.
If you don't document it, but your family think you had a plan and just don't know who you bought it from and what the details are, the FPA has a trace a funeral plan facility on its website.
9. Don't confuse Funeral Plans with over-50s life insurance plans
Funeral plans are different. That's because you can pay in one go up front, or a set amount each month for a set period of time (typically for up to five years or less) – so there doesn't have to be any ongoing payments for life
10. Consider whether you need money to live on now
If you need the money more desperately now, then you'll need to consider whether a funeral plan is the right option for you. Also, bluntly, your funeral will then be down to your family to arrange, so won't be your problem. If there's enough money left in your estate when you die, the funeral can be paid for from that.
We hope you found this article helpful!
Newlife Wills team.