What an uplifting topic and one that I have covered it before but it’s important to update these topics periodically, especially this one. The reason this came to mind was because yesterday morning I had to submit my application to the FCA to continue to be authorised to supply advice on Funeral Planning. While the first Funeral Plan I did was back in 1993 (for my mother), the Funeral Planning concept has never been regulated. However, as of the 1st of September, anyone offering Funeral Planning advice must apply to the FCA. Over the years, there’ve been many, many IFAs and others selling Funeral Plans but as its been unregulated they could pretty much charge anything they wanted which has never been acceptable, I’m delighted that the FCA has stepped in.
It cost me a rather grand sum of £1,250 to submit my application. I was a bit taken aback to see that sum leave my bank account this morning but nevertheless, as it’s for something dear to my heart, I know it’s worth it. The paperwork alone was difficult to plough through and it took 12 hours before I felt ready to submit the application. That’s one reason why lots of IFAs aren’t bothering to become officially authorised, the paperwork alone (and the price)!
Funeral Planning is Good for the Soul!
People like to put off things that make them uncomfortable but please don’t ignore it because the end is unfortunately inevitable. When I did my mother’s Funeral Plan, she was relieved and glad. She died ten years after it was put into place and for the last two years of her life, she was in a care home, having suffered a stroke. So, she never had to worry about her funeral, the costs associated or not having what she wanted because it was done. When she died, my sister and I had firsthand experience in understanding why she was relieved it was all sewn up beforehand.
Up to now Funeral Plans have paid the advisors or will writers or whoever was processing the plan commission. Over the last few years, the Funeral Plan advisors have chased business and commission has crept upwards. I saw a plan earlier this year that paid £900 commission out of a Funeral Plan that might cost £3,500, that comes out of the value of what’s been provided and the cost to the applicant. It’s disproportionate and that’s why the FCA has banned commission on Funeral Plans, thankfully.
Funeral Planning and Estate Planning Go Hand in Hand
Having said that, last Friday I was talking to a Funeral Plan advisor, and he said the FCA was going to wreck the Funeral Plan market because of the “no commission”. He said to me that the only way of making money now from Funeral Plans is by charging a fee and most people aren’t going to want to pay a fee. Well quite honestly, I have a different view. I feel Funeral Planning is an important part of my holistic financial advice I would happily do it for nothing for my clients! However, within the context of Estate Planning the cost of Funeral Planning can be incorporated into an overall fee. Estate Planning for me is part of Funeral Planning as it’s also about making sure your assets are arranged properly, which I will come back to. It’s about passing things to your beneficiaries, it’s about inheritance tax planning (what we call Estate Planning). Its planning for the time of death when we pass on to wherever we end up.
Has Your Property Been Handled Correctly?
I came across a case recently where I had a client who refused to do Estate Planning. Her husband had left her 20 years previously (quite literally disappeared). They couple had two daughters. When the lady in question died (she had cancer and was ill for several months), her estranged husband turned up. He took the house – the wife had assumed her house would go to her daughters but as the house was still joint tenants, it went to him, and her daughters didn’t get a penny. Let that be a warning! Estate Planning is part of Funeral Planning – trust me, ask yourself if your property has been handled correctly.
Don’t Assume Estates Just Pass On Upon Death
Here’s another example. A couple who had been together 30 years had the house in her name, she died, and he had no right to live in the property even though he had lived there for thirty years because, under the laws of intestacy he didn’t inherit anything, and it all went to their daughter instead. Don’t just assume everything passes on upon the moment of death, it doesn’t, there are laws in place, and you must plan everything efficiently.
Don’t Let the Wrong Next of Kin Foot the Bill!
Back to Funeral Planning. I had a girl who worked for me over 20 years ago. She had an unwell brother in his mid-40s who couldn’t work and was on benefits. When he died, the local authority came to her (as the sister) to pay for the funeral – you assume the local authority will pay but they go to the nearest next of kin. They delivered a bill to her with payment due within a month.
Funeral Plans Rise in Value
Funeral Planning is really important. It affects all sorts of people whether poor or rich. If I’m investing a million pounds for a client, I will put £3,500 to £4,000 into a Funeral Plan because the plans increase every year by approximately 7%. If that 7% rise continues, it’s a good investment in my book!
It Takes the Stress Away
It’s not about investment it’s also about having everything in place for those you leave behind. I had a client who died in December 2019 who lived alone but he’d put his Funeral Plan in place. His friends called me on his death, so it took one phone call by me to the funeral director, and I told his friends that everything was arranged. It happened like clockwork. Funeral Planning takes a lot of extra stress away from the bereaved. It’s a relief to find everything’s been organised and makes the process of burying a loved one simpler too.
This may not be everyone’s favourite topic but it’s important none the less, so please, do get in touch if you want to start Funeral Planning.