Segregated Planning for Life and Death


Death and dying is definitely one of those subjects none of us likes to talk about; equally so with funeral planning. I will admit, it hadn’t been on my radar until my wife and I recently went through the process of shopping for and pre-paying my in-laws’ funerals. It was an eye-opening experience both emotionally and financially.


Documenting our personal wishes is a gift to those we leave behind – for adult children, spouses, family and friends. This is but the first hurdle; an emotional ashes to ashes tug of war. Most people I have talked to have some inkling as to their parents’ burial wishes – not so much for themselves. Whether an actual plan is paid for, is entirely another matter. In our case, my in-laws had purchased burial plots; that summed up the wish part pretty well. So, what about the cost of funerals? In one word, ASTRONOMICAL!


The Billion Dollar Funeral Industry

Funeral Services are a ten plus billion dollar industry. It is also an industry that can expect a guaranteed raise in revenues over the next 30 years or so due to the boomer generation. How do you think the law of supply and demand will play into that?


To give you a feel for cost, the National Funeral Directors Association (NFDA) published a report of  national averages last fall. Here’s how the numbers played out in a five year period between 2004 and 2009 for basic funerals:



On the surface, these numbers don’t look too bad; $6,560 for an average funeral; $7,755 with a vault. (The vault is the cement box the casket goes in.) What these numbers don’t reflect are the following costs: Flowers, ($200 – $800), Hair Setting, ($75-$125), Death Notice in Paper, ($200-$275), Death Certificates ($15 for the first one and $5 for each additional – you’ll need 5-6), Opening & Closing fees per Grave, (we were quoted $2,085), Grave Markers, ($700-$1,800+, depending on what you want), Marker Setting Fees, ($200-$300+), Funeral Luncheons, ($500- $2,500+) and Sales Tax on the casket, vault and marker.


When these additional fees are added in (on the low end), the average funeral cost comes in around $12,000. Cremation can be cheaper, but if you want to have a wake before cremation, the cost is close to the same. (The Dignity Memorial funeral chain charges $1,400 to “rent” a casket for wakes before cremation.) You may also consider buying your “tangible property” items elsewhere than from the funeral home. Believe it or not, you can buy caskets online (by law, the funeral homes must accept these types of purchases), with free 24 hour turn around shipping at significant discounts. We investigated Best Price Caskets online and found that some $2,500-$4,000 funeral home caskets were available for $1,200 and less.


The biggest fixed amount reflected in this chart is the “non-declinable basic services fee”. This is where every funeral home starts their pricing – an arbitrary figure that’s non-negotiable – kind of like the sticker price at a car dealership. And, “car shopping”, is exactly what you’ll feel like you’re doing when you sit down and start banging out all the “extras” you’ll need to put together an entire funeral from start to finish.


Funeral Funding

The most glaring item in the chart above is the accelerated rate of inflation the funeral industry sustains – almost 18% on average – far beyond the national rate of inflation.


The funeral industry’s high rate of inflation is an extremely important factor to keep in mind for planning purposes. For example, let’s say I took out a $12,000 funeral policy today at the age of 51. In five years, at the industry average rate of inflation of 17.9%, the average funeral will be $14,148, a difference of $2,148 beyond my policy. In 10 years, my funeral would cost $16,680; another $4,680. In 15 years, $19,665; in 20 years, $23,185, almost double the original $12,000 I planned for.


Naturally, I’m hoping I’ll live to 91, at least. In that case, an average funeral 40 years from now could cost more than $45,000, making that initial $12,000 policy of little help to my loved ones. Pre-pay is the way to go – no pun intended.


Veteran Planning

Those familiar with Veteran benefits know there are reduced rate funeral programs. In Illinois, that means any honorably discharged vet (and their spouse) can get a complete church funeral and burial (net of a luncheon) for $3,985 at a “national cemetery”.  The closest ‘national cemetery’ in the Chicago area is Lincoln Memorial in Joliet.


In the Chicago area, the local Veterans organization provides alternatives for simple funerals at lesser costs, cremation and waking at a Vet sanctioned funeral home on the northwest side of the city. Though burial in Joliet was not an option for our family, we were still able to utilize cost reduction Vet benefits in our pre-payment plan.


NOTE: To receive veteran rates, you must go through the Chicago area website: Veteran funeral benefits also differ by state; search your “state name + veteran funeral benefits” to find local contact info.

Next Step

Funeral funding is executed through life insurance. Many people look at life insurance solely as an instrument to pay for their funeral; this can be a costly mistake. While there are some types of policies that factor in inflation, they do so at the national average rate of inflation – far less than the funeral industry standard.


There are several options you can take to secure a solid funeral plan. You can work directly with a funeral home to execute a pre-pay funeral in the form of a designated trust or funeral life policy. While this option would lock in today’s rates, it will not provide for your loved ones.


Alternatively, segregated planning may be your best option: work with a funeral home to lock in today’s prices with a small funeral specific policy (via payment plan) and work with your financial advisor to protect your estate and provide for your family. Boomers, in particular, should seriously consider this approach due to today’s extended work life and mortality rates.


Kurt Rusch, CLU, ChFC

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