My aunt is likely to pass away in the next few months, but she has no savings. What funeral costs will I face?

By LINDA MCKAY

Updated: 04:09 EST, 2 July 2013

My aunt is in a nursing home and as her only surviving relative I have been told to settle her affairs as she is very fragile and likely to fade in the next few months.

She does own her own home and has very little savings, and she has no one else so I feel I should know what to do.

A while back she told me she has paid into the Co-Op for her funeral to save me the worry but what are the likely costs that I should be prepared for? Via email.

Funeral costs can quickly mount up

Linda Mckay, of This is Money, replies: How sad that your aunt is in the twilight of her years and that the burden has fallen on you, her only surviving relative, to begin the process of organising her affairs. You may be surprised to hear that grieving relatives are paying an astonishing £7,114 to bury loved ones.

Steep increases in burial fees, funeral director charges, hiring hearses and cremation costs pushed bills in 2012 to record highs according to research.

The costliest burial fees are in Lambeth, south London, at £5,329 while crematorium charges peak at £3,464 in the City of London. Outside the capital, a funeral in Exeter can cost £2,650 while a cremation in Manchester is £2,012 and in Wolverhampton £1,811.

Understandably this kind of cost could come as a shock to any relative so I asked our panel how you might start to prepare for it. Some experts agree that her funeral plan might help with finances. But you should be aware of the following:

Consumer champion Which? found the provisions within some funeral plans to beat rising costs are falling short. And some plans have been found to contain expensive exclusions that can leave surviving relatives facing extra bills of up to £1,200 so should your aunt have a funeral plan in place you may need to check up on the small print.

Doctor’s fees and charges for the church, ministers, organists, choirs, grave-digging and burial plots are not included in plans that are offered by key providers.

Prepaid plans have become popular as funeral costs have gone up by seven per cent a year for the past decade, way above the current savings rates and rate of inflation.

With the average cost of a basic funeral now £3,704 for a burial and £2,863 for a cremation, plans are a good proposition for people who don’t want to place this financial burden on loved ones.

Most providers link costs to the retail price index (RPI), currently 2.9 per cent, which is much less than the ¬soaring costs of funerals. As a result funeral plans taken out with Age UK and Dignity in 1998 left families facing a £1,200 shortfall last year.

Which? has looked at 21 prepaid plans from key providers and found that while they all cover the funeral director’s costs in full, many just paid a contribution towards “third party” costs such as doctor’s fees, booking a church, digging the grave and buying plots for burials. 

Only the Co-operative and Family Funerals Trust offer to guarantee all third party costs, apart from the price of the plot itself.

Age UK, Dignity and Golden Leaves offer to pay a contribution towards third party costs that increase by the RPI each year, while Golden Charter offers just a contribution. Researchers found prepaid plans are a better option when opting for cremation, because Dignity, Age UK, the Co-operative and Family Funerals Trust guarantee to cover all core costs. Which? has now called for the Financial Conduct Authority to take over the regulation of funeral plans to make sure they are sold properly and money invested is secure.

Linda Mckay adds: For you the next step is to obtain a copy of your aunt’s funeral plan to ensure that any exclusions can be met. Consult a legal expert to make sure you have power of attorney to conduct affairs on her behalf and who could also help with any possibility of Inheritance tax issues should you find yourself her sole beneficiary.