Can Funeral Costs be Paid before Other Debts?
10 January 2018
The short answer to this would be yes. When a person passes away, the cost of the funeral can be paid first, before any other liabilities (debts) of the Estate. However, some secured debts, such as a mortgage or a secured loan, will need to be paid before the funeral costs.
If the funeral was arranged by Co-op Funeralcare, we can pay the Co-op Funeralcare invoice if you use our Probate Complete Service, providing there are sufficient assets in the Estate that can be sold to repay our costs. This can mean that you have one less thing to worry about.
With our Probate Complete Service we take full responsibility for getting Grant of Probate and dealing with the Legal, Tax (not VAT), Property and Estate Administration affairs.
Paying the Funeral Costs Using the Deceased’s Savings
If there are sufficient funds in a deceased person's bank account(s), the funeral costs can be paid for using these savings. When the bank or building society is informed of a person’s death, they will normally freeze the account(s). If you can provide the bank with a copy of the death certificate and funeral invoice with your name on it, the bank will usually arrange payment for the funeral straight away to the funeral director providing the service.
If the person who died had a joint bank account, the surviving account holder will be able to access the bank account(s) and pay the funeral costs using the funds in the account(s).
Pre-paid Funeral Plans
In some cases, the deceased person may have had a pre-paid funeral plan in place or some type of funeral insurance. A pre-paid funeral plan is where the person who has died has pre-paid a funeral director or funeral care company for a specific type of funeral. You will need to check whether the pre-paid funeral plan covers all of the funeral costs.
Alternatively, the person who died may have purchased some sort of insurance which pays out a fixed lump sum that covers the cost of the funeral. This insurance is sometimes known as an “over 50s plan”. When a claim is made and the lump sum is paid out, this can be used to pay for the funeral with any funeral director, whereas with a pre-paid plan you are tied to one specific funeral director or company. Again, it is worth checking whether the insurance will cover the full cost of the funeral.
Paying the Funeral Costs Yourself
If you pay for the funeral using your own funds, you can look to recover the costs back from the Estate, as long as there are sufficient funds in the Estate to do so.
It may be useful to list the order of payment of debts for Estates where the total value of all of the assets is insufficient to settle all of the debts, liabilities and administration expenses. This is known as an Insolvent Estate.
The order of priority may look something like this:
- Debts that have been given preference by the law
“Preferential debts” which consists of 2 categories:
- arrears of state & occupational pensions
- monies owed to employees in respect of salaries and accrued holiday pay
All other debts
- Interest on preferential and ordinary debts
- Deferred debts (e.g. payment of loans to a deceased's spouse or family).
Any administration expenses of an Estate, such as professional fees, can be paid once funeral costs, expenses that arose during the Estate administration and any Inheritance and Income taxes due have been settled.