Advice on Paying Funeral Costs

Timing of Payments

The funeral industry is aware that many people find it difficult to quickly pull together several thousand dollars to pay for a funeral. On the other hand, since it is impossible to reclaim a coffin or repossess any of the services associated with a funeral, funeral homes understandably want to be sure they get paid. Advance payment is almost always required for cremation and direct burial. For traditional funerals, some homes ask for payment in advance once arrangements are decided upon, although if asked they might work out an installment plan. Other homes allow 30 to 60 days for payment with no interest charges, and almost all homes accept credit cards.

Check for Available Benefits

Because many people are not aware of the benefits available for final expenses, money often remains unclaimed. Remember that most death benefits are not automatically sent to survivors and must be applied for.

Filing for death benefits on behalf of survivors is a standard service of most funeral homes. If survivors decide to file their own claims, the funeral director should be asked if this will reduce the home’s “professional services” charge.

Social Security

A lump-sum Social Security death benefit of $255 is available to a surviving eligible spouse or dependent child (under 18). When there is no survivor, no payment is made. An application for the payment must be filed within two years of the death. Payment is made directly to the surviving spouse or entitled child, never directly to the funeral home.

Veterans Benefits

Honorably discharged veterans and their spouses may be entitled to burial in one of 135 national cemeteries in 40 states (and Puerto Rico) with a grave marker and a flag for the casket. Other benefits may be available if the death occurred during active duty or during hospitalization in a veterans’ facility. To check for benefits, contact the Veterans Affairs Benefits Office (800-827-1000).

Other Benefits

Other possible death benefits are payments from fraternal organizations, lodges, clubs, union welfare funds, retirement plans, and employers. To track these down, survivors should get in touch with organizations and institutions the deceased worked for or was affiliated with. Many of these benefits are available for surviving relatives to use as they see fit, not only for a funeral.

Necessary Documents and Papers

Application for death benefits will require obtaining a number of documents. You are likely to need:

  • Social Security number of the deceased
  • Typically five to 10 certified copies of the death certificate to establish insurance, Social Security, and other claims
  • Copies of birth certificates of surviving spouse and minor children for Social Security, VA, and other benefits
  • Copies of marriage certificate for Social Security and VA benefits for surviving spouse and minor children
  • Copy of W-2 form or federal income tax return for the most recent calendar year as proof of deceased’s record for Social Security benefits
  • Copy of veteran’s discharge papers for VA benefits
  • Copies of receipted bill from funeral home for VA benefits—also for Social Security benefits if applicant is not the surviving spouse

Avoid Prepaid Funeral Plans

You can write down your own preferences for your funeral arrangements and give them to a likely survivor. Alternatively, you can file a preference form with a funeral home without making any financial commitment. Both are good ideas.

Many funeral homes push plans that let you prepay for your funeral. These agreements represent major financial commitments and, in our opinion, are usually not prudent. Under a prepayment plan, you arrange with a particular funeral director to pay a lump sum, or make installment payments for, the items you select for your own funeral. You can make these payments into a trust or a life insurance policy arranged through the funeral home. Before making such a commitment, find out—

  • What the contract does not cover;
  • What happens if you die before the plan is fully paid up;
  • How much you get back if you cancel;
  • Whether the funeral home has been in business for many years and has a good reputation;
  • What happens if the funeral home goes out of business or changes ownership;
  • Whether the arrangement is guaranteed to cover all your funeral arrangements, even if prices increase;
  • Whether the money you put away will earn interest, and at what rate; and,
  • What happens if you move.

Do not sign a prepayment plan until your attorney looks over the contract. And be aware that while the funeral industry wants to sell you peace of mind, prepaid funerals often create more problems than they solve. It’s not uncommon for the new owner of a funeral home to refuse to honor price guarantees made by the previous owner. Likewise, many “cash advance” items or services provided by a third party—such as fees for death certificates, opening and closing graves, grave vaults and liners, engraving, and honoraria for clergy or musicians—are not guaranteed, so families frequently face additional expenses. And many unscrupulous funeral directors across the U.S. have simply embezzled customers’ prepaid funds, leaving the family with nothing.

A simpler arrangement: Open a savings account called a “Totten trust” at a bank, naming your chosen funeral home as the recipient of the funds upon your death. Alternatively, you can open a joint savings account with a likely survivor; then the survivor will have access to the funds when you die. Both arrangements let the funds avoid probate and make them available immediately for funeral costs. Under both arrangements, however, you must pay income taxes on earnings.

In any event, tell your likely survivors about any arrangements you make with a funeral home, so they don’t pay for services at a different home.