Funeral Plan

What is a funeral plan?

Pre-paid funeral plans allow you to arrange and pay for your funeral costs in advance. It will give you peace of mind to know that everything will be how you would have wanted and your family won’t have to face any financial stress when it comes to arranging your funeral in the event of your death. 

How does a funeral plan work and what do they cover? 

The idea of funeral plans is that they protect your money until it’s needed to ensure that the funds go towards your funeral. You can pay monthly payments or a lump sum to the plan provider or directly to a funeral director. Your money can then either be invested into a trust fund with trustees or in an insurance policy, which is then put towards your funeral costs. 

What’s covered in funeral plans varies greatly between providers. Some will only cover the funeral director’s bills and others will provide cover for a church service, limousine procession and viewings of the deceased. The cost of flowers, catering and burial plots are typically excluded. Make sure you compare as many plans as possible in order to get the best funeral plan for you.

Is my money safe in a pre-paid funeral plan?

Your payments are either put into a trust fund or invested into an insurance policy. The Financial Conduct Authority (FCA) safeguard money that is put into trust funds and policies, however, they don’t regulate funeral plans. 

If you want to ensure that your money is protected, you might want to check whether the provider you plan to buy a funeral plan from is signed up to the Funeral Planning Authority (FPA). The FPA pledge that in the event of a provider going bust, it will pay towards ceremonies covered by funeral plans. 

You could also protect your money by paying on your credit card. All credit card payments over £100 are protected by Section 75 of the Consumer Credit Act 1974.

Funeral plan

What are the alternatives to funeral plans?

Your funeral can be paid for in advance without having a funeral plan in place and there are many ways of doing this. You could put savings into a bank account or ISA and let your solicitor or next of kin know that the money set aside is intended to cover your funeral costs. If you have a life insurance policy, your family can put part of the payout towards your funeral costs. Alternatively, your family can pay for your funeral and claim back the expenses from your estate. This can be a good way of reducing your inheritance tax liability if your estate is over the inheritance tax threshold.

Pros

  • Your family don’t have the financial stress of paying for your funeral once you’re gone
  • You have complete peace of mind that your funeral is planned and your family don’t have to worry about organising or paying for it in the event of your death
  • You can plan your own funeral in advance and have a choice over music, flowers, invites etc
  • If you pay for your funeral in advance, the money used towards the plan will be free of inheritance tax

Cons

  • Money put into funeral plans is non-refundable so it can only be put towards the cost of a funeral
  • Your money isn’t protected by the FCA

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