Crowdfunding: An Alternative Way to Handle Funeral Costs

If you haven't planned a funeral recently, you may be surprised how expensive they can be. The National Funeral Directors Association puts the average figure at between $7,000 and $11,000, depending on where you live.

Unfortunately, most people don't plan their funerals in advance, leaving loved ones in the difficult position of trying to raise funds. That's where crowdfunding comes in. Although crowdfunding pioneers Kickstarter and Indiegogo were focused mainly on artistic and entrepreneurial ventures, today's crowdfunding platforms help fill a variety of financial needs — everything from tuition, to wedding costs, to medical bills and, yes, even funeral expenses.

Crowdfunding platforms host thousands of funeral and memorial expense campaigns, many of which reach or exceed goals of $10,000 or more. The concept of soliciting donations for funeral costs may seem unusual, but it's really no different than relief organizations asking strangers to give to a special fund after a hurricane or a flood. The disaster is just on a smaller and more personal scale with memorial campaigns.

If you've never considered crowdfunding as a source of financial assistance after a loved one dies, here's what you need to know.

Get a realistic estimate of the amount you'll need

Although the "average" funeral can cost more than $10,000, you don't have to use all of the services a funeral director offers — and many fees can be negotiated if you comparison shop. The Federal Trade Commission (FTC) established a Funeral Rule that protects you and works in your favor when it comes to funeral expenses. Under the rule:

• Funeral homes are required to give you a price quote over the phone — and they cannot demand your name, address, or other personal information before doing so. You have a right to privacy while you comparison shop.
• You can choose only the products and services you want to buy. If you want to purchase a casket from a vendor offering a lower price, you can still use that casket at the funeral home you choose for the memorial service. The funeral director cannot force you to buy from him or his chosen vendors.
• You can ask for a written price list of everything the funeral home offers. This general price list (GPL) must be publicly available and you can ask for a copy to take home and review before making any decisions.
• You are entitled to a written price quote once you choose what products or services you want from a funeral director.
• You cannot be forced to have your loved one embalmed. Every state allows for a "direct burial" or "direct cremation" shortly after death, which can save hundreds to thousands of dollars.

Look for any government benefits you may be entitled to

If your loved one worked long enough to be eligible for Social Security benefits, you may be entitled to a lump sum death benefit. To see if you qualify, contact the Social Security Administration Survivors Benefits department. You can also find out if your loved one has designated a burial fund with Social Security.

Veterans may also qualify for a burial and interment plot allowance, which can help offset costs.
 

Choose your crowdfunding platform

It pays to look at fees before you choose your platform. Although most crowdfunding platforms say their funeral campaigns are "free," that's not entirely true. While most will not charge you a fee to set up a campaign on their site, there are transaction fees, which can vary widely by site. Some platforms give donors the option of handling the payment processing fees upfront, while others simply deduct it from your payout at the end of the campaign.

It's also important to check whether your platform allows flexible funding or "all or nothing" campaigns. Most crowdfunding platforms require you to set a donations goal for your campaign; with flex funding campaigns, you get to keep all the money donated regardless of whether you meet your goal. All-or-nothing campaigns return money to donors if the goal isn't met.

Finally, look at how easy or difficult it is to set up a campaign using the platform. Most platforms use a straightforward template you can personalize with photos and text, and offer a social promotion toolkit so you can share your campaign on Facebook and other social sites to help get the word out. If you're unfamiliar with Internet tools, you may want to look at a few sites to gauge how user-friendly they are.

Set up your fundraising campaign

Before you write your campaign, take some time to collect photos of your loved one. Look for clear pictures that help tell the story of his or her life.  GoFundMe suggests that the most successful funeral campaigns are story-type tributes with five to 10 high-quality photos that potential donors can relate to and connect with. If your loved one was fond of gardening, include photos of her tending to her favorite plants, for example. Build a narrative so that donors feel as if they are getting to know your loved one.

Be specific with your financial needs. You'll set an overall campaign goal, but in your campaign description be honest about what the money will go towards. If you want a floral memorial wreath that costs $250, or if the fees for your funeral home director are $2,000, include these as separate line items. Many sites let supporters donate to a specific expense, and breaking them out may encourage a stronger response. It promotes transparency as well, which reassures potential supporters, and for further assurance, you may want to let them know who will be handling the money.

Finally, keep supporters updated on your progress, and thank specific donors by name. This encourages your donors and friends to share your campaign on their social media pages, which provides more exposure to new potential supporters.

Be aware of applicable tax law

In most cases, donations to memorial fundraising campaigns are considered gifts to the organizers and are not generally subject to income tax. However, lavishly funded campaigns may raise red flags with the IRS — another reason it pays to line-item your expenses in your campaign. On the donor side, donations to a memorial campaign are generally considered gifts and not charitable contributions; typically, they aren't considered tax deductible.

Sheila Olson is a Charlotte-based freelance writer specializing in investing, personal finance, entrepreneurship, and retirement planning. She is a regular contributor at Investopedia and the Motley Fool and writes frequently for the banking and consumer credit industry.

For Compliance Use Only:1015257-00001-00