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Smart Ways to Cover the Costs of a Funeral

There are more options than you think

Smart Ways to Cover the Costs of a Funeral
Sam Kaplan for AARP

You probably don’t want to think about it, but at some point you are going to die and someone's going to have to pay for the funeral. With the median cost of a traditional funeral running $7,640, according to the most recent price data from the National Funeral Directors Association, you should plan for it like any other large, looming expense.

You may be thinking, I’ll just set aside money in my will. That works, but it’s not the best way to go. Your survivors won’t be able to get that money until your estate wends its way through probate, which takes from a few months to a year. Since most funeral homes want full payment upfront, your survivors will have to front the costs out of pocket. Here are some alternatives for covering that final bill.

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Insurance

Many life insurance policies will pay a lump sum when you die to a beneficiary of your choice. It will pay for your funeral or any other general financial needs of your survivors. The payment is made soon after you die and doesn’t have to go through probate. There’s also burial insurance, which is a policy intended to pay death-related costs, and pre-need insurance, a policy intended to cover a predetermined amount for a funeral.

The Funeral Consumers Alliance (FCA), a death-care industry watchdog group, advises against buying pre-need and burial insurance, because you’ll often pay as much or more in premiums than the policy will pay out.

Payable-on-death (POD) account

This is a type of bank account that allows you to put aside funds for your funeral and name someone who can get access to the money when you die. They present a death certificate to the bank and get the money — on the spot. It doesn’t go through probate.

A POD account, sometimes called a Totten trust, is not a joint account; the person you name beneficiary cannot touch the money until you’re dead, but you can withdraw or add to the account at any time. Be sure the person you name as beneficiary is someone you can trust to use the funds for your funeral, not a cruise to Cancun.

Savings account

You can put money aside in a regular savings account, but it will have to go through probate once you die. Again, this delays the payout.

You can get the money to survivors faster if you set up a joint account with the person who will be handling your funeral and give them rights of survivorship. When you die, they become the sole owner of the account and can withdraw money to pay for your funeral.

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The downside is that they have access to your money while you’re alive, too. This could be a problem if your survivor turns out to be less than trustworthy.

Veterans benefits

If you were in the military, you can be buried in a national cemetery, with no charge for the gravesite or marker. Space is limited, so if you’re thinking this is where you want to spend eternity, you should get a predetermination of burial eligibility now. You’ll need to pay for any funeral services like embalming, burial and picking up the body, though.

Even if you choose not to be buried in a national cemetery, the Department of Veterans Affairs (VA) offers an array of death benefits for former service members, including:

  • Up to $2,000 for burial costs if the death was service-related.
  • A $300 burial allowance and up to $807 for a plot if the death was not service-related.
  • Up to $807 as a burial allowance and $807 for a plot if the death was not service-related but the veteran was hospitalized by the VA at the time of death.

The VA website has details on eligibility and application procedures for veterans burial benefits.

Borrowing

You can get a loan to pay for a funeral from banks, credit unions and specialized lenders. But these are personal loans, which means they’re unsecured, hard to get and expensive. Interest rates range from 5 percent to 36 percent on personal loans, depending on the borrower’s credit score. That’s like paying for a funeral on a credit card.

Low-cost options

If your budget is tight, look at cheaper alternatives like direct cremations, at-home funerals or green burials. Another option: donating your body to a medical school. You’ll help train future doctors and save your family a ton of money.

If you want to go the cadaver route, make arrangements in advance — most institutions require pre-enrollment. Once the facility is done in a few years, they’ll cremate the body for free and return the ashes to your family.

Prepay at funeral home

Funeral homes sell prepaid plans. The FCA advises against buying one. It’s not that funeral directors are out to get you. It’s just that your situation may change between when you pay and when you die.

“You can lose money if you change your mind before you die, or you end up dying in another state from where you paid for the funeral,” says Joshua Slocum, the FCA's executive director.

Some prepaid plans include the cost of transporting a body to another location, and some funeral homes are part of national companies that will honor prepaid plans bought at any of their properties. But keep in mind that 89 percent of the nation’s funeral homes are locally owned and not part of a larger network. Be sure you understand what’s included in your plan, and what isn’t.

Prepaying at funeral home might be a good idea if you are facing a Medicaid spend-down before going into a nursing home, though. Medicaid can’t count money spent on a prepaid funeral, Slocum says.

Editor's note: This article was originally published June 7, 2020. It has been updated with more recent information on funeral costs and funding options.