By TJ Porter, WCI ContributorNo one likes to think about death, especially not their own. However morbid it is to ponder, dying is something we all do in the end, and there are financial ramifications to that. Your loved ones will already be dealing with mourning your loss and having to plan for a funeral, so the last thing you want to do is leave them with the financial stress of paying for your end-of-life and funeral costs.
According to the National Funeral Directors Association, the median cost of a funeral in 2023 was $7,848, which isn’t a small sum. To ease the burden on your family, you might consider prepaying for your funeral expenses, but is that a good idea?
How to Prepay for Funeral Expenses
If you’re interested in prepaying for your funeral, the typical route is to reach out to a funeral home while you’re still alive. Some funeral homes offer prepaid packages, letting you hammer out the details of your funeral and pay the expenses up front. Usual prepaid funeral policies cost between $10,000-$25,000, and they can be paid directly to the funeral home or through a third-party provider. Some funeral homes allow for payment plans, letting you pay the costs over time rather than in one lump sum.
When you die, the funeral home already knows your wishes, and it's already received payment, meaning your family does not need to worry about paying the costs.
Reasons to Consider Prepaying for Your Funeral
There are several reasons you might consider prepaying for your funeral.
One is, of course, to ease the burden on your surviving loved ones. If you’ve already paid for your own funeral, your survivors will not need to worry about paying out of pocket for the funeral and burial or cremation. Prepaying also allows you to lock in the cost of your funeral. If costs rise in the future, the fact that you’ve already paid means you don’t have to worry about setting more money aside for funeral costs.
In addition to removing the financial burden, it can also save your family the stress of trying to decide on the type of funeral you would have wanted. Most prepaid funeral plans involve you working with the funeral home to lay out your wishes for how to conduct the funeral.
If you prepay for your resting spot, you can also be certain that your remains will rest where you want them to and need not worry about your preferred burial location becoming full or otherwise unavailable.
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Why You Shouldn’t Prepay for Your Funeral
There are also drawbacks to keep in mind before you decide to prepay for your funeral.
One is that you’re reliant on the funeral home you prepay to still be operating when you die. If you prepay your expenses at a funeral home that later closes or goes out of business, you likely won’t get your money back and will have to make new arrangements. This can also be an issue if you wind up moving away from where the funeral home is located. Either your family will need to travel to where the funeral home is located or forfeit the prepaid plan and make new arrangements.
Another drawback is that you’ve tied up money you could use for other purposes. If you send $10,000 to a funeral home to cover your future costs, you can’t invest that money or put it in the bank to earn interest. You also can’t use it to make other purchases.
Finally, an important consideration—especially for people like physicians who tend to have high incomes and a solid base of financial assets—it may simply be unnecessary. You can instead designate a portion of your estate to pay for your funeral costs.
Alternatives to Prepaying Your Funeral Expenses
Prepaying for your funeral expenses is just one option for making sure your family does not have to pay for your burial and funeral. There are other options to consider.
Funeral Insurance
Instead of prepaying for your funeral costs, you can consider buying a funeral insurance policy. Like other insurance policies, funeral insurance involves making a monthly premium payment. When you die, the policy pays out, and the money is explicitly designated for funeral expenses.
One benefit of these policies is that they can be used at any funeral home, avoiding the issue of prepaying at a home that closes or you move away from. However, you may wind up paying a lot in monthly premiums, especially if you live to an old age.
Life Insurance
A standard life insurance policy can also be helpful for paying for funeral costs. Your family can use some portion of the life insurance benefit to handle the expenses.
A benefit of this strategy is that you don’t need to carry an additional insurance policy just for funeral costs, and many people already carry life insurance. However, there’s no guarantee that your beneficiaries will use the life insurance proceeds to pay your funeral expenses.
Set Aside Money in Your Will
When you write a will, you can set aside some of the money you leave behind to pay for your funeral. That means you don’t have to worry about buying life insurance or funeral insurance. However, depending on your state’s laws, the money may be held up in probate, keeping it from being immediately accessible.
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Write Down Your Wishes
No matter how you plan for your survivors to pay for your funeral costs, the most important thing you can do is to clearly communicate your wishes for how to conduct your funeral. Leaving a clear, written document is best, as it can help avoid conflict between family members who have different ideas of how you’d want your life to be celebrated.
The Bottom Line
Prepaying your funeral expenses can help relieve some of the financial stress that your family can face when planning your funeral, but for most physicians, it isn’t necessary. If you are in a good financial position, designating some money from your life insurance policy or in your will is typically sufficient for covering the costs.
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