View the article online at http://citywire.co.uk/money/article/a523654
Rising funeral costs: can you afford to die?
The average cost of a basic funeral is now just over £3,000. Lorna Bourke explains how to ensure your loved ones aren't left to cover the bill.
The cost of dying has risen to £7,248 – the equivalent to three months of the average person’s pre-tax salary, according to Sun Life which has been surveying the cost of funerals as well as other expenses associated with a death in the family.
The cost of a basic funeral alone averages at just over £3,000. This is a considerable sum of money, and given that most people make no plans for their death let’s hope that someone in the family has some cash handy. Because even if you leave a substantial sum of money in your will to pay for your funeral, in most cases this cannot be accessed until probate has been granted and any outstanding taxes – such as inheritance tax, income tax and capital gains tax – have been settled.
Funeral costs are rising
The £7,248 estimate for the total cost of dying – which includes expenses like headstones and flowers – is a £400 increase on the 2010 figure and a rise of 20% since 2007.
One of the major costs of dying is obtaining probate – the legal process of administrating the estate of someone who has died. According to the survey estate planning costs have reached a record high at £2,292, representing a rise of 4.2% rise from 2010.
However, the largest contributing factor to the cost of dying is non-discretionary funeral charges which have risen by 8.2% since 2010. Non-discretionary costs are the inescapable expenses such as funeral director’s costs, doctor’s fees for certification, fees for a religious or secular service and burial or cremation charges.
Extras such as death and funeral notices in the newspapers, flowers, order sheets, memorial headstone, limousines, venue hire and catering for the wake meanwhile can add many thousands to the total bill.
Worryingly the Sun Life survey found that a quarter of people have made no ‘end of life’ plans at all – which includes making a will and a lasting power of attorney should you become unable to manage your own financial affairs in later life, mitigating inheritance tax if possible, providing a sum in an insurance policy, written in trust, to cover funeral costs and other outgoings associated with death like obtaining probate.
Do not expect state help
Though it is true that once you are gone you won’t know or perhaps care what your family arranges for your funeral, do not expect the state to pay. Only 38,000 awards, just 7% of all deaths in the UK, were made by the Department for Work and Pensions administered social fund funeral payments scheme in 2010/11 – worth £46.2 million in total and averaging £1,217 per applicant. A further 34,000 applicants to the scheme were unsuccessful.
The shortfall between average payout received and average funeral cost meanwhile is substantial, and looks set to continue to grow. In 2007 the fund paid out £1,117 per claim which would cover 47% of an average £2,390 funeral. In 2011, the fund pays out £1,217 which would only cover 39% of an average £3,091 funeral.
What’s more, an earlier survey carried out in 2000 by the Oddfellows Friendly Society showed that the actual cost of a funeral is considerably higher than that quoted initially by the funeral directors. This is substantiated by the Sun Life Direct survey which found that 53% of respondents said the funeral cost was more than they expected, up from 36% in 2009. Only 7% said the cost was lower than anticipated.
The Citywire guide to investment trusts
In association with Aberdeen Asset Management
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