Written by Randy Clayton

Last month my younger brother died at the age of 54. It was not totally unexpected because he had a long list of health and lifestyle issues that would shorten even Superman’s life.  Still, I figured he’d at least make it to age 60. As the only sibling within a 600 mile radius, a portion of the funeral arrangements fell on yours truly. Fortunately for me, the cost of cremation was divided with my brother and sisters because my deceased brother was indigent.

My father died in 1992. He was cremated and his ashes were put into a niche in a cremation wall at a local cemetery (near the duck pond). Cost of cremation in 1992 was approximately $750. Five years later my mother died, and her ashes were put into the same niche as my father. The cost of cremation in 1997 was approximately $1,200.  Now let’s fast forward to December 2011: The cremation costs for my brother were approximately $2,800. Total costs actually exceeded $2,800 because of the cost of the obituary, death certificates, and Celebration of Life party, which were all in addition to the cremation expenses. For a more apples-to-apples comparison, the same niche in the wall that I mentioned earlier has now risen to $1,900.  Over the last 20 years, these expenses have risen faster than inflation for many reasons. That is not the issue I intend to discuss here. Today, I want to tackle a question I often hear from clients: “Should I pre-pay for funeral arrangements to lock in the expense and prevent future cost increases?”

Before I write about pre-payment plans I do want to strongly recommend that if you are over age 50, and you care about what happens at your funeral, you should pre-arrange (please note that pre-paying and pre-arranging are 2 separate and different items). You can do this informally with a file folder containing your instructions in your desk at home, or more formally with a completed questionnaire provided by your local funeral director.  Your spouse and/or your family will benefit greatly from you writing down what music you’d like, where you’d like to be buried or cremated, and what your obituary should say. Other things you could list would be your favorite flowers, pall bearers, limo arrangements, etc.  As you can imagine, it is very difficult for survivors to read your mind, and very stressful for them to guess “What would (fill in the name) have wanted?” I also suspect many survivors spend more than the deceased would have wished.

Prepayment is a little more complex. If you have lived in the same town and had the same spouse for the last 30 years, you definitely know where you want to be buried (or your cremated remains placed), and are at least 70 year old, then I would recommend you strongly consider pre-arranging and pre-paying. Pre-paying can be a difficult decision because life expectancy is getting longer, residency is fluid, re-marriage common, acceptance of cremation greater and funeral home ownership changes plentiful, all factors that create too many variables and scenarios to adequately quantify. While good rules of thumb are hard to come by, if you meet my 30 years of stability and 70 years of age rule, then pre-payment often makes good sense. In addition, if you believe there is a chance that you may end up broke in a nursing home, it would likely be best for you to pre-pay. Also, if you have the cash and don’t plan to be alive in the next three years then go ahead and pre-pay.  For everyone else that falls outside of my parameters listed, it would be my recommendation for you to have a sinking fund (assets or life insurance proceeds) to cover the costs, versus signing a long-term contract with a funeral home.

Obviously, you don’t want to burden your children or other family members with decisions and bills. Make it your New Year’s resolution to take care of the business of dying. Everyone, including your financial advisor, will be glad you did.

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