A pre-paid funeral plan will cover some of the basic costs of a funeral when the time comes.

If you want to make arrangements for your funeral costs, you can pay in advance so that your loved ones will have less to deal with in respect of organisation and payment. In deciding whether this is right for your situation, you will need to weigh up the pros and cons.

Advantages of a funeral plan

While a funeral plan is generally expensive, it is likely that when it is used, costs will be higher. It can also be financially advantageous if you live in an expensive area as the costs of the plan may be comparatively lower.

Your loved ones will not have to try and access funds from your estate to pay for the funeral. Although this is generally possible, it is not always simple and can involve correspondence with banks to ask for money.

Money paid in advance for a funeral will not later be counted when assessing the value of an estate for Inheritance Tax purposes. This means that the amount paid is effectively free of Inheritance Tax.

In the summer of 2022, the funeral plan industry is due to become regulated. At this point, it will be a requirement that a funeral plan will have to pay out even if it was paid by instalments and not all of the instalments had been paid, except where the plan is less than two years old.

Disadvantages of funeral plan

They are expensive and if funeral costs fall or the funeral is relatively soon after the plan was taken out, there could a financial loss overall.

A funeral plan does not cover everything, so there will still be expenses and decisions to be made when the time comes. A basic plan will not cover a limousine for example. You need to understand exactly what is included when deciding whether to take out a plan. The plan may only cover a contribution towards the costs.

The plan may restrict choice, for example, of when the funeral can be held, which funeral director can be chosen and use of a chapel of rest.

If you pay by instalments, the cost will be higher than a single lump sum payment.

Your loved ones will still have to pay for items such as flowers, the wake and a burial plot.

If you are likely to need the money during your lifetime, a funeral plan is probably not the right option for you. If you change your mind and wish to withdraw your money, you will be required to pay a cancellation fee.

Deciding whether or not to take out a funeral plan

If possible, you should discuss matters with your loved ones so that they know what to expect and what you would like to happen when the time comes. If you do decide to take out a plan, make sure that they know about it and who to contact to make use of it.

You can discuss this and other requirements such as a Will and Lasting Power of Attorney with your legal adviser, who will be able to talk through your situation with you and ensure that you have the right arrangements in place for your unique circumstances.

If you would like to speak to one of our expert estate planners, ring us on 01634 353 658 or email us at rob@pembrokewillwriters.com