Why you should preplan (and prepay) for your funeral

Most people have a blind spot when it comes to their own demise, says Winnipeg-based funeral home operator Kevin Sweryd.

“We all agree on the need for insurance for life’s possible misfortunes; yet too few of us plan for the inevitable misfortune of death,” says Mr. Sweryd, who is also president of the Manitoba Funeral Service Association.

Too often, he says, people leave funeral planning to loved ones they leave behind, which can mean paying more than they should for services as inflation creeps in each year. It also puts an extra burden on family members at the time of your death, when all they want to do is grieve.

Mr. Sweryd is seeing a growing number of people who are preplanning their funerals – and prepaying for them too – instead of leaving it for loved ones to sort out.

“Prepaying has definitely been growing as the baby boomers have entered retirement with their houses paid off and their kids’ university paid for,” he says.

Planning and paying for a funeral several years in advance is usually an after-thought, even among financial professionals, says Vince Murton, a senior wealth planner with Wellington-Altus Private Wealth Inc. in Toronto.

“Truthfully, I didn’t focus that much on the issue because it just didn’t move the needle for most clients,” he says.

However, his perspective changed after his mother passed away. As executor, Mr. Murton dealt with paying for the funeral while his father and brother handled the arrangements. Amid the shock and the grief, “you’re not in the headspace” of funeral planning, he says.

“All you want to do is be sitting at home, crying your eyes out with family – not picking out a casket.”

Indeed, even just selecting a casket can be overwhelming, Mr. Sweryd says.

“There is such a wide range … and a casket can cost anywhere from a few hundred dollars to upwards of $15,000.”

Planning ahead helps ease the financial burden for family members which, not even including the casket cost, can be significant, says Veena Daddar, a Toronto-based financial adviser with Pyramid Wealth Management Inc., an affiliate of Canada Life Assurance Co.

While funeral services can range from a few thousand dollars at the low-end, the average cost is much higher.

“Whether it’s cremation or a funeral, both cost in the range of about $10,000,” she says.

To finance a funeral in advance, Ms. Daddar typically tells clients they have three options: One involves setting aside about $10,000 to $20,000 in a savings account that the executor can easily access upon death. Another is funding a small life insurance policy.

The problem with both is they may involve delays accessing the funds, which may be problematic when a service must be carried out within a few days of death. If that’s a concern, then prepaying may be the best choice, she says.

There are a few benefits, including having time to comparison shop. Preplanning and prepaying can save up to 30 per cent, Mr. Sweryd says, partly because it locks in the expense at today’s prices, avoiding the risk of paying inflated costs years down the road.

“Almost everything costs more in the future, whether it’s a loaf of bread or a casket, so you’re protecting yourself against inflation by prepaying.” (Mr. Sweryd notes buyers should ensure the contract for the prepaid services states payment will be held in trust or protected with insurance if the funeral home goes out of business before the services are required.)

Cost concerns aside, many individuals tend to be myopic when it comes to their estate, be it funeral plans or even just a will, says Michelle Connolly, senior vice-president of advanced wealth planning with Wellington-Altus Private Wealth.

“Often we hear, ‘I don’t care; I’m going to be dead.’”

While not having a will almost always leads to an estate horror story, so too can leaving funeral plans for the family to figure out and pay for on their own, Ms. Connolly says.

Individuals may not need to go to the extent of prepaying and preplanning, she says, but they should let their wishes be known to family members, at the very least, to avoid future conflict.

Preplanning and prefunding ensure funeral wishes – particularly elaborate plans – actually take place, Mr. Sweryd adds.

More baby boomers are going this route for this reason. Some plan parties instead of a traditional service. One even involved a tropical-themed affair at a restaurant with margaritas served for guests – the favourite drink of the deceased, he says.

“Preplanned funerals tend to be bigger events because you can carefully plan it your way.”

These plans may include ensuring whether cultural and religious practices are (or aren’t) taken into account.

Ms. Daddar says prepaying or prearranging “may be taboo for some cultures,” even though religious and cultural beliefs often inform how funerals unfold, such as if they person is buried or cremated. Yet, following those rites can involve additional costs, including fees for services at a church or temple.

Mr. Murton’s mother’s funeral was a small affair amid pandemic restrictions but it likely would have been a simple service regardless, he says, because that was what the family wanted.

Funerals for larger, blended families, however, can create more potential for conflict. Preplanning and prepayment can help avoid that, he adds.

“It’s not really something you do for yourself,” Mr. Murton says. “It’s something you’re doing for the people who are going to be left behind.”

While his dad hasn’t yet prepaid for his eventual funeral, the family has already paid one expense: the cemetery plot next to his mom.

As Mr. Murton explains: “It’s not like you can stick up a traffic cone and hope someone doesn’t take the spot beside mom, right?”