They are the big three: your will, power of attorney for property and power of attorney for personal care.¹ We talk about these documents a lot because they’re essential to protect your family and your estate in case of your death or incapacity. There’s another important, but lesser discussed aspect to estate planning and that’s mapping out your funeral.

 

Yes, it sounds morbid, and we know it’s a very personal matter, but the reality is funeral planning raises a lot of questions and decisions for family and friends during a stressful time. In today’s world, there are more choices than ever before, which both helps and complicates matters. We’re also seeing that people have an ever-growing desire to control how their lives will be celebrated, including setting a budget and supplying detailed instructions for their families. 

 

For instance, when our client Henry Jones recently passed away, as his executor, we were responsible for paying for his funeral. Several years ago, Henry bought a preneed funeral services contract from a local funeral provider. In the contract, Henry specified the coffin, the gravesite he had paid for, his headstone wording and the flowers for the memorial service. He paid the funeral provider in advance, so there was no problem accessing funds after he died. Things went exactly as Henry had planned. His family didn’t have to second-guess what their father may have wanted and, as a result, faced far fewer emotional decisions. There were no worries about how to pay for the services. 

 

From our vantage point, here are some things you may want to consider, such as the difference between preplanning and prepaying for a funeral. You can plan in as much detail as you wish, either on your own or working with a funeral provider. You can record your wishes informally (by talking to your spouse or children, for example). Or your chosen funeral provider can collaborate with you to have a formal document in place that sets out the exact items and services you wish to buy. No money needs to change hands to plan your own funeral down to the most precise details.

 

However, there may be benefits to making financial arrangements ahead of time to pay for the detailed funeral you have planned. According to Dignity Memorial, funeral costs in Canada can range from $1,000 to $20,000, with the average cost being about $9,000.² Few people have that much cash hidden in a coffee jar or under their mattress. If the money is in a bank account in the deceased person’s name, there may be delays gaining access to the funds.³

 

This is where a preneed funeral contract can sometimes be helpful. It’s a written arrangement between you and your chosen funeral provider, where you pay in advance for products and services to be provided after your death. You can pay as one lump sum payment, as a series of instalments, or by paying premiums on a special type of life insurance policy. Under provincial legislation, the funeral provider must deposit the money you have paid⁴ into a trust fund held by a trust company, earmarked for your funeral. This ensures the money will be available when you die. In return for your upfront payment, the funeral provider agrees to deliver your funeral services for the price you paid, even if costs rise in the future.

 

The trust company, holding the prepaid funds in trust, invests that money to earn income. When you die, your original purchase amount plus the earned income is paid to the funeral provider, who hopes that the earned income covers any price increases in the items and services you selected. If the income is insufficient to cover price increases, the funeral provider must deliver the services without extra cost; if the income is more than necessary, the excess must be returned to your estate.

 

Some benefits of a preneed funeral contract include:

• Controlling your funeral costs.
• Ensuring your wishes are documented and therefore more likely to be followed.
• Saving your executor(s) the financial burden of paying for your funeral should your bank accounts be temporarily frozen.
• Reducing future probate fees.
• Sparing your family and/or friends the need to make immediate decisions, giving them permission to follow your wishes and grieve your death in their own way.

 

On the flip side, it’s prudent to consider these drawbacks:

• You lose ready access to the prepaid funds. If you need the cash, you may be unable to get it back quickly.
• Your plans might evolve over time. Perhaps you change your mind about burial versus cremNeeation, or move to a different city where your funeral provider doesn’t do business.
• New services may appear in the future. For instance, over several decades, Canadians’ choices have shifted from traditional casket burial to cremation. The rate of cremation, which was approximately 48% in 2000 rose to 73% in 2020.⁵Today, green burial⁶is becoming an increasingly popular alternative.
• Your funeral provider might go out of business (although this risk is mitigated by provincial regulations that require prepaid funds to be held in trust by a neutral third party trust company).

If the idea of a pre-need funeral contract interests you, we recommend that you know, understand and are satisfied with the answers to these questions BEFORE signing any contract.

• Is the contract flexible?  Can you change the products or services?
• What happens if you move and want your funeral held in another city or town?
• Can you transfer the contract to another funeral provider?
• What happens if the products you select are not available at the time of the funeral?
• To what extent is the price guaranteed?
• What happens if the funeral provider sells or goes out of business?
• Can you cancel the contract, and how much money will you get back?

 

Long-Lasting Rewards

While prearranging your funeral may be tough, if you can deal with it emotionally, there are few drawbacks. Discussing basics—such as whether you want to be buried or cremated, and the funeral home and cemetery you prefer—with your spouse, children or executor pays dividends in terms of sparing people close to you the stress of figuring out (or arguing about) how you’d want your life to be celebrated once you’re gone. If you’re living where you expect to die one day, and if your mortality risk is rising due to advanced age or perhaps a serious medical condition, choosing a funeral provider, and buying a preneed funeral contract may be a sensible decision for your estate plan.
 

It's often said that funerals are for the living. Participating in making the final arrangements can certainly help survivors grieve. But there’s also comfort in knowing the funeral is consistent with the deceased person’s wishes. A good funeral plan can help make things easier for your family, avoid unfortunate arguments and let family focus on remembering you and your life.

 

Unlike the big three—your will, power of attorney for property and power of attorney for personal care—prearranging or prepaying for your funeral is optional, but we believe you and the people in your life should think about the peace it can bring.

NOTES:

1.Outside Ontario, a power of attorney for personal care goes by different names in each province, but achieves the same purpose: establishing an agent to make health care decisions for you if you can’t make those decisions yourself.

2.“How Much Does the Average Funeral Cost in 2021?” Cremation generally costs less than burial. https://www.dignitymemorial.com/en-ca/costs/funeral.

3.Many banks in Canada will release funds from a frozen bank account to pay for funeral costs, but there will be strict procedures to follow and access to funds may not be immediate.

4.If you cancel your contract, depending on the province, the funeral provider may keep a percentage of your prepayment. It may not be refundable.

5.“Cremation rate in Canada from 2000 to 2020,” statista, January 11, 2022, https://www.statista.com/statistics/916310/cremation-rate-in-canada.

6.The Green Burial Society of Canada Story, http://www.greenburialcanada.ca.