Today’s blog is written by guest blogger Katherine Downey. Katherine is a professional educator and licensed funeral director specializing in prepaid funeral planning. She can be reached at (905) 717-9197 or at (905) 399-5341. Email: katdowney@legacymatters.ca. Website: www.legacymatters.ca
You have died. Over the next few days what will that look like for your loved ones? Your family is grief stricken and they must decide what to do with your body. They love you and want to honor your life. They go to the funeral home to make the arrangements and it is here they learn just how much their ideal tribute to you will cost.
As a funeral director and expert in funeral preplanning, I see the benefits of making funeral arrangements in advance every day, be it in the form of a pre-paid funeral, EFA, or life insurance.
The average funeral in Ontario costs approximately $8,800, but the range can vary from $1,600 to $15,000 or more. The cost is influenced by the level of service people choose, and the type of casket, urn, vault, or container selected, which can vary significantly. “Direct disposition,” which involves either burial or cremation without a public visitation or funeral service, is the most basic (and least expensive) option. A memorial service is an additional cost, followed by a full funeral, which traditionally includes a visitation and the body being present during the funeral service itself.
The average age that most people make arrangements for their own funeral is 68 years. However, there are benefits to planning sooner, especially during a person’s higher income earning years of 40, 50, or 60. Investing earlier means one can contribute to the costs over a longer term as well as using earned income rather than retirement income.
As of July 1, 2012, all funeral homes in Ontario must guarantee prepaid funeral contracts. This means that everything chosen today is priced from a current pricelist, including applicable taxes, and the costs are locked in and guaranteed from the date of the contract until the funeral is required. This may have contributed to the increase in pre-paid funerals in Ontario over the last two decades: in 1998, 81,000 Ontarians pre-paid for their funeral arrangements. In 2013, that number jumped to 295,484, a 358% increase (Source: Ontario Board of Funeral Services Oct. 31/13).
There are also tax advantages associated with an EFA (Eligible Funeral Arrangement). The Federal Government permits any amount to be paid into a prepaid funeral certificate, and the first $15,000 earns tax-exempt interest.
With an EFA, the purchaser’s money is invested in an insured guaranteed certificate earning up to 2.0% interest annually. These funds remain in a tax sheltered escrow account during the investor’s lifetime. When the funeral is required, it is paid for from the guaranteed certificate and any extra money is returned to the estate.
Another common funeral planning tool is life insurance. When deciding between a pre-paid funeral and life insurance, there are key differences to keep in mind. With life insurance, there is no guaranteed funeral cost. However, life insurance offers greater flexibility. The beneficiary (usually the spouse) can use the insurance proceeds in any manner they see fit. In addition, the life insurance proceeds are often tax free. The money may be used to maintain the beneficiary’s lifestyle or cover unexpected expenses.
Whether choosing life insurance or a pre-paid funeral, the emotional and financial benefits of planning ahead provide families with greater peace of mind.
