Why and how to plan your funeral

Nobody wants to think about what happens when they pass away, but having a plan in place for your funeral arrangements will make a difficult time that little bit easier for the loved ones you leave behind. In this post, we look at the advantages of funeral planning and how you can get the peace of mind that comes with knowing that your family won’t have to find the money to pay for your funeral.

Thinking about your funeral

The chances are that you’ve already given some cursory thought to what you’d want your funeral to be like – what music would be played, whether or not it would be in a church, and so on. Funeral plans take this a step further by ensuring that the costs of your funeral will be met. At a time when the average funeral costs £3,700, and some families are being pushed into debt as a result, funeral planning is an important consideration. There are three different ways of doing it.

Types of funeral plan

1. Pre-paid funeral plan

A pre-paid funeral plan is exactly what it says on the tin: you make the arrangements directly with a funeral director and pay for it in advance. However, this requires a large upfront payment (usually in the region of £3,500), which protects your investment from inflation, but you may not have the funds immediately available to cover it.

It’s also worth remembering that there may be additional costs on top of what you’ve pre-paid, such as admin fees for changing your funeral plan, or extra costs if you die significantly away from your home address. Furthermore, this type of funeral plan is not protected by the Financial Services Compensation Scheme, which means that if the funeral provider went into administration, you’d lose the money you’ve paid.

2.  Over-50s life cover plan

You can take out insurance cover, paying a monthly premium that you might see referred to as an ‘Over-50s Life Cover Plan’. This spreads the cost, so you won’t have to make any large upfront payments. Everyone is guaranteed to be accepted, and you won’t need to supply any medical information.

Over-50s Plans are financial investments, and don’t involve making arrangements with a funeral director. It’s important to note that Over-50s Plans are investment-based, so the amount of money you ultimately end up with for your funeral will depend on how those investments perform. You will also need to check the small print carefully before signing up, as some policies won’t pay out at all if you’ve not met the minimum number of monthly payments. However, you do have more financial peace of mind with this kind of funeral plan, as they’re covered by the Financial Services Compensation Scheme.

3. Self-fund

Alternatively, you can fund your own funeral, saving the money in a bank account or putting it into investments of your own. You can still write down your wishes for your funeral in your will, or write to the executor of your will with your desired funeral arrangements.

Funeral plans and inheritance tax

Because your funeral costs come out of your estate before inheritance tax is calculated, whether or not you have a funeral plan won’t make any difference to the inheritance tax paid. Whether you decide to have a funeral plan or not is therefore up to you, and it’s a decision you need to make based on your own family circumstances.