Financial Provisions for Funerals: How to Relieve Survivors and Make Preparations

A good 6,000 to 7,000 euros – that’s how much a funeral in Germany can cost, according to Aeternitas, a consumer initiative for funeral culture. Not exactly a piece of cake. But many people underestimate the costs, notes Klaus Morgenstern from the German Institute for Retirement Provision.

It can make all the more sense to discuss the topic with relatives at an early stage. On the one hand, it is clear what a person’s wishes and ideas look like. On the other hand, where the money for burial, gravestone, cemetery fees, etc. comes from.

Creating a will can be a good opportunity to talk to family members. However, simply writing it down there is not a good idea. Aeternitas points out that a will is usually not opened until well after the burial. Until then, relatives will otherwise be fishing in troubled waters.

But what are the options for financing the funeral? We’ll show you:

Anyone who has enough money in old age can be confident that the surviving relatives will not be unable to finance the funeral. After all, the estate usually goes to the people who pay for the organization and costs. However, Morgenstern advises making appropriate arrangements for financing the funeral in your will. In this way, possible disputes can be prevented if there is a community of heirs.

A big disadvantage of this variant, according to Aeternitas: Even the part of the inheritance that is intended for the burial is only paid out to the heirs a few weeks after the burial and the opening of the will. However, the costs arise much earlier and must therefore be advanced.

If you want to prevent the heirs from having to pay in advance, you can also make provisions with a so-called trust account. To do this, people entrust third parties with a certain amount of money during their lifetime, which is earmarked and can therefore only be used for funeral costs. “A trust account is usually set up as part of a funeral provision agreement,” says Morgenstern. For example, funeral guidelines can also be recorded there.

The funeral provision contract is concluded with a funeral home. According to Aeternitas, the trust account with the necessary total amount should definitely be managed by a trust office. According to Morgenstern, these include lawyers or tax advisors. This eliminates the risk that the money will be lost if a funeral home goes out of business or goes bankrupt. In the event of a funeral, the money is released into the trust account and paid to the funeral home.

The advantage of this variant: It is safe, the surviving relatives do not have to pay in advance and cannot fail to comply with the wishes of the deceased. The disadvantage: The trust administrator’s service must be paid for.

If you only have a little money available, you can also think about taking out funeral insurance. Such a policy, which is available at relatively low premiums, pays out a fixed amount to the person named in the insurance contract in the event of death. This is usually the person who is supposed to organize and pay for the funeral. The following applies: the later the insurance is taken out, the more expensive the premium will be.

The disadvantage: According to Aeternitas, full insurance coverage often only exists one or two years after the policy has been taken out. Peter Grieble from the Baden-Württemberg Consumer Center also points out that there are significantly greater risks with much greater potential for damage. If you have little money available anyway, it would be better to invest in personal liability, residential building or household contents insurance. Only when there is still money left over after covering the more serious risks should you think about taking out funeral insurance.

Instead of death benefit insurance, you could also consider taking out term life insurance, says consumer advocate Grieble. Such a policy provides financial protection for surviving dependents in the event of their own death. If the insured event occurs with death, the surviving dependents receive the agreed amount. According to Aeternitas, the contributions are often cheap when you are young, but they increase as you get older.

Disadvantage: A degree is often only possible up to the age of 65. In addition, according to Grieble, this insurance usually has a time limit. At the age of 70, 80 or 85, for example, you lose the protection and the money you paid in is also gone – used up for the insurance protection you received up to that point.

For deceased people who have already received a pension and leave behind a spouse, the pension payment continues for three months after death. Peter Grieble points this out. If the money is not needed for other purposes such as rent payments, it may be used for the funeral.

By the way: upon request, the three pensions can even be paid out as an advance, i.e. in one sum. The application must be submitted to the Deutsche Post Pension Service within one month of death.

People with low incomes who have no opportunity to make provisions themselves have no choice but to rely on the financial resources of their relatives. Under certain circumstances, they can pay for funeral insurance contributions or provide other financial support during their lifetime, points out Grieble.