What to Know About Funeral Costs—and How to Plan for One

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Talking about death can be both unpleasant and painful, which is why many people avoid discussing it until the eleventh hour. Whether it's losing someone who has been battling illness for decades or making sense of a freak accident out of the blue, the shock can feel paralyzing. Unfortunately, it is at the height of this grief when most families are forced to make time-sensitive decisions that have hefty financial consequences. How to make the best of such a difficult situation? Plan in advance—well before you think you need to.

A survivor's to-do list includes everything from searching for insurance documents in old papers and making long phone calls to access bank accounts, to deciding which funeral home to use and how to accommodate out of town guests. Here are some parts of the process that can be discussed and budgeted for many years in advance—in order to protect your own emotional and mental health, as well as your family's.

Insurance and Accounts

Many life insurance policies will provide a beneficiary an immediate burial allocation after notification of death. "The best way to defray the cost of a funeral is to secure a minimal insurance policy," says Tiffani N. Brown, a Tallahassee-based estate planning lawyer. "Having an insurance policy will relieve the burden on family members of fundraising or dipping into their own personal savings to bury their loved one."

These kinds of policies are useful because there's no waiting for an estate to be settled or for a final death certificate to be issued. However, it is worth considering whether or not you actually need burial insurance at all. At the going rate of $7,000+, many healthy people find that, at a certain point, they've paid more in insurance premiums than the actual payout. So it is worthwhile to review these expenses periodically, and to decide if there's still a need.

It is possible that saving that amount and establishing a joint bank account with trusted beneficiaries would actually be a smarter financial move. Otherwise, a payable on Death (POD) account is a wise alternative. Unlike a joint account, the beneficiary won't be able to withdraw money before the death of the account holder. The account holder can also withdraw money any time before their death, treating it truly as an emergency fund.

Wills, Trusts, and Pre-Paid Plans

Brown says that adults should also establish a will or trust to lay out their desires for what to do with proceeds from a life insurance policy or other assets. Some people want a special headstone or mausoleum, while others would prefer that excess money go to heirs and philanthropic causes.

Brown also says that some states have specific agencies that assist people in entering into "pre-need contracts," which allows an individual to lock in a rate for their funeral service and pay in advance. Pre-paid funeral plans can extend to everything from land plots to burial arrangements, from florals to car services. But it is important that heirs are aware that these plans have been made and it is worthwhile to shop around for the best prices before locking in such an agreement.

Josh Slocum, executive director of the Funeral Consumers Alliance, told AARP that "some prepaid plans can actually cost you more in payments over time than the amount they'll pay out on your funeral." He also says that most people don't bother to shop around for low costs but go with the "funeral home closest to them, or the one their family has always used."

With the benefit of time, families can jointly plan in ways that keep everyone informed and save everyone money over the long haul.

RELATED: Should You Pre-Pay for Your Own Funeral as Part of Estate Planning?

The FTC Funeral Rule

If a person hasn't made arrangements for themself, that leaves a lot for a beneficiary or heir to decide. There is so much upselling in funeral expenses that the Federal Trade Commission (FTC) has a Consumer Information page to clarify facts from fiction. The FTC explains its Funeral Rule, by explaining "pre-need Arrangements" and the obligations that a funeral home has to their clients. The page states that "the funeral provider must give you an itemized statement of the total cost of the funeral goods and services you have selected when you are making the arrangements. If the funeral provider doesn't know the cost of the cash advance items at the time, he or she is required to give you a written 'good faith estimate.' This statement also must disclose any legal cemetery or crematory requirements that you purchase specific funeral goods or services."

There are a number of upsells that the FTC warns against, including embalming and expensive caskets labeled as "protective" or "sealed." Both may imply that the body is preserved indefinitely. The fact is that embalming isn't required in many states, and if the funeral is soon after the viewing, then it isn't really necessary. Caskets are true money makers for most funeral homes, which sell mahogany and other adorned versions that might tug at a person's heart strings. The FTC states plainly, "No casket, regardless of its qualities or cost, will preserve a body forever…The Funeral Rule forbids claims that these features help preserve the remains indefinitely because they don't. They just add to the cost of the casket."

These days, funeral homes are obliged to work with families that choose to purchase a casket from an outside vendor. Most people don't realize that Costco and Trusted Caskets, for example, offer top of the line designs at a fraction of retail costs.

Cremation, Aquamation, Donation, and Other Alternatives

Families that opt for cremation don't need to buy a casket at all, they can rent one. And families that don't want a memorial viewing can even do away with it altogether and instead place an oversized photo. Overall, cremation can shave thousands off the cost of funerary expenses, but it may take time for everyone in a family to agree that this is the right approach.

Today, there are other options that aren't necessarily cheaper, but might be your preferred way to honor the person who has passed on. Aquamation became popular after Bishop Desmond Tutu decided to do it; it's a relatively new technique in which the body is placed in a tight water chamber with around 100 gallons of water and alkaline chemicals. The chamber is heated, which turns the soft tissues into water and the bone into sand-like material. This process is thought to be more environmentally friendly than other methods. According to Republic World, the average cost of Aquamation is $2,000 to $3,000, much less than the cost of a conventional funeral. Also, human body composting is growing in popularity in places like Colorado, Oregon, and Washington state—where the process is legal.

Some families might not have to pay for funerals of any kind, because they've decided to donate the body to science. This can happen through an agreement with local medical schools and research institutions, but arrangements should be made in advance and cremated remains typically take months, not years, to be returned to families. According to its website, Science Care offers no-cost cremation for those who donate their bodies to science through their program. And Biogift's website also explains its practice. Although these options are free, they can be hard to agree to at the height of grief. So, it is best to discuss these choices well before the time comes to need them.

There are a lot of ways to give your loved one a dignified send off, but each option has different price points as well as emotional costs. Families should discuss all these options in advance, setting as many things in motion as possible. Together, they can financially prepare for the remaining issues by setting up insurance, bank accounts, and estate planning documents that will cover all pending expenses—and better yet, provide some much-needed peace of mind.