Financing a funeral without the anguish

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Thinking about funerals isn’t pleasant.

But planning ahead ensures the elderly that they will receive the type of funeral they desire and enables survivors to avoid spending excessively after their loved ones are gone.

Deciding what you want

“The more you can deal with ahead of time, the easier it will be,” says Karen Altfest, vice president of LJ Altfest & Co., a New York City financial planning firm. “There’s usually not time for shopping around after a person has died. Many people aren’t in a position where they can shop around at that point.”

The median price of a U.S. funeral, including a vault, totaled $7,323 in 2006, up 11.3 percent from two years earlier, according to the latest data from the National Funeral Directors Association. Deluxe funerals can top $10,000, while simple cremations can cost as little as $800.

Thus deciding what you want carries great financial significance. “Have a frank conversation with the people who will be living,” says Joshua Slocum, executive director of the Funeral Consumers Alliance in South Burlington, Vt.

“Do you want a religious or secular service? Is a viewing of the body important? Do you want a cremation or burial? Does what you’re looking at fit with how you spend money on an important life passage?”

William Counts, president of the Chicago Memorial Association, opted for simplicity when his wife died in 2006. “She wanted to have her ashes scattered at Rocky Mountain National Park,” he says.

Counts received the park’s permission to do so and gathered the couple’s three children and two grandchildren. “We just had a meeting one morning and went out and scattered the ashes. It was like a memorial service outside.”

Total cost: $800, all of which was for cremation. “We did it with a funeral director,” Counts explains. “He came and picked up the body for cremation. Then they sent us the assets through the mail in a plastic bag that was enclosed in a cardboard box. We kept that until we took it to Colorado.”

Shopping for the best option

You’ll want to check out several funeral homes to see which has the best prices and gives you the most comfort. “When you’re going to buy a car, most people go to several dealers. You don’t just walk into a dealership and buy, but that’s what many people do with funerals,” Slocum says.

Ron Hast, who has owned 14 funeral homes in Los Angeles and now publishes two trade publications about the funeral business, offers three additional tips for the shopping process.

1. Talk to them early. When you telephone a funeral home to inquire about its services, let the staff know that death hasn’t yet occurred. That way they can give you time when they have it. “People want to get information on the phone right now, but that’s just not good,” Hast says. “The funeral director tries to be helpful, but if someone is crying in the next room, he’ll be distracted.”

2. Visit the homes in person. “That’s because you will see more in person than on the phone or Internet,” he says. “A firm might have an appealing presence on the Internet, but what’s there in reality might not meet your needs.” Hast compares shopping for a funeral home to shopping for a wedding. “A bride goes to see what’s there. She doesn’t just get on the phone for prices and services.”

3. Call ahead. “If you call a home and say you want to get information about arrangements and funding, they can put aside time for you.”

Knowing your legal rights

“The first thing we tell people is to know what your legal rights and options are,” Slocum says. The law stipulates that funeral homes must give you an itemized price list as soon as you start talking about arrangements.

“Funeral directors will tell you that you get what you pay for,” he says. “In many transactions that’s true, many times it’s not.”

For example, the services provided in direct cremation don’t vary, Slocum says. “The body is picked up, you complete paperwork including the death certificate, the body is cremated and the ashes are returned to the family. That doesn’t vary.”

But the charge for that identical service can range from $800 to $3,000, he says. “You need an ability to put your (B.S.) detector on.”

The Funeral Consumers Alliance has a pamphlet on its Web site that lists 14 myths about funerals. They include the following:

Some myths about funerals
  • Embalming is required by law. That’s never true during the first 24 hours and isn’t necessary at all in many states. Refrigeration is a cheaper alternative.
  • Vaults are required by law. No state has such a law. However, many cemeteries do insist on vaults. That’s because vaults keep graves from sinking after the body and casket deteriorate, reducing the need for maintenance.
  • Cremated remains must be placed in an urn that is then put in a cemetery. You can save money by just leaving the ashes in the cardboard or plastic box provided by the crematory. And you can spread or bury the ashes on private property anywhere in the country, as long as you have permission from the property owner.
Paying for the funeral

You have a variety of choices. “I would say that more than half the time, people charge their funeral on a credit card,” says John Horan, president of Horan & McConaty, which owns six funeral homes in the Denver area.

This method of payment works fine as long as enough money is available to pay off the monthly credit card balance in full.

Experts say the best way for the elderly to provide money to their survivors for funeral payment is to create a joint savings account with a beneficiary. The money in the account can be used to finance the funeral.

“You can name anyone you want as beneficiary: whoever you trust to take care of arrangements,” Slocum says. “The money doesn’t go through probate, and it stays in your name. The interest accrues to you.”

Just be sure that your beneficiary knows the money is to go toward your funeral. “Things aren’t well communicated sometimes, because people don’t want to talk about death,” says financial planner Altfest.

Unfortunately, interest rates are low now, but obviously a bank account is much safer than an investment in financial markets.

There are two other payment options.

Additional funeral payment options
  • A prepaid funeral (formally known as an irrevocable funeral trust). Funeral homes receive the trust’s interest payments to compensate for the effect of inflation. Many experts criticize this method. “In a lot of cases, consumers end up paying more than if they just paid at the time of death,” Slocum says. You’re betting that the funeral home won’t go out of business, and in some instances you don’t get your money back if you move. Also, some states don’t have strong rules to protect your funds. “In Florida, for example, a funeral home can skim 30 percent off the top of your payments to keep for itself,” Slocum says.
  • Life insurance. You can designate that benefits go to pay for your funeral. But if you live for a long time, your premium payments may surpass the value of your funeral. “We dealt with a couple in Ohio who paid $9,900 in premiums for a funeral that cost about $5,000,” says Slocum.