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Understand how life insurance works

Crowdfunding a Funeral: What’s Involved and Is It Worth the Risk?

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As social fundraising sites like Kickstarter and Indiegogo rise in popularity, it’s little surprise that people are turning to these types of sites for help with an expense that can be unexpected and significant: funerals.

According to a 2019 study1 by the National Funeral Directors Association, the median cost of a funeral with burial in the U.S. is $7,640. And that doesn’t include what you’ll pay to the cemetery, or for a headstone or additional items such as flowers or an obituary.

And most Americans can’t afford such an unplanned expense. In fact, a 2020 financial security survey2 by Bankrate found only four in 10 U.S. adults would use savings to cover the cost of a $1,000 emergency.

While the practice of communities chipping in to help defray funeral costs is a time-honored tradition, a growing number of people are turning to social fundraising, or crowdfunding, to raise money for funerals.

GoFundMe, the largest social fundraising platform, says it hosts more than 125,000 memorial fundraisers a year that generate in excess of $330 million.3 Memorial fundraisers are held to pay for funeral costs, help families cover living expenses, create educational funds for children, raise money for charities on behalf of departed loved ones, or a combination of reasons, states the company.

While there are certainly instances where funeral crowdfunding has helped families or individuals facing genuine financial hardship to deal with unexpected funeral costs, the practice has caused controversy. Critics say that crowdfunding can cause loved ones to overspend on funeral expenses, trigger disagreements on how funds should be spent and, in some cases, may even encourage a lack of planning and financial responsibility. And some have used funeral crowdfunding for fraudulent gain.

How funeral crowdfunding works

Crowdfunding solicits donations through a person’s social media networks. Here’s how it works:

  1. An organizer — usually a loved one or family member — starts a campaign on a social fundraising
  2. Links to the campaign are shared through social media networks, by email and text messages. As people share and forward the campaign to others, more people see it and potentially donate to it.
  3. The campaign organizer manages online donations, thanks donors and then withdraws funds to pay for the funeral, minus the cost of using the fundraising website.

The popularity of funeral crowdfunding is growing. In April 2018, GoFundMe acquired YouCaring.com, a charitable fundraising website that caters specifically to the bereaved. Other crowdfunding platforms that raise money for funerals are Plumfund, Ever Loved, Social Funeral Funding and Fund the Funeral.

The pros and cons of funeral crowdfunding

Consider the advantages and disadvantages of social fundraising before relying on this approach to pay for funeral expenses:

Pros:

  • It helps families facing financial hardship. Funeral crowdfunding can be a godsend, especially if the death is unexpected or the family has substantial medical bills to pay. “This is just another tool to help,” explains Jonathan Fisher, a third-generation funeral director who cofounded Fund the Funeral. Even raising a small amount of money can help alleviate the financial burden on a family, he says.
  • It’s tradition. Extended families, tightknit neighborhoods and faith communities have long come together to pay the funerals costs for those in need. “That’s been happening for hundreds of years,” says Paddy Lynch, a third-generation funeral director at Lynch & Sons in Clawson, Michigan. With today’s crowdfunding platforms, that effort has gone public and digital, he says.
  • It’s a way for the community to express grief. People often want to help the departed’s family but don’t know exactly how, or they live too far away to attend the funeral and to provide aid in person. Funeral crowdfunding gives them a direct and easy way to support the family.

Cons:

  • It’s not a sure thing. A funeral generally takes place three to seven days after a death, while raising money through crowdfunding and getting access to the funds can take weeks. If you hold an elaborate funeral in the meantime and don’t get enough donations to cover the cost, what do you do then? “It’s a gamble” that could cause loved ones further financial problems, says Joshua Slocum, executive director of Funeral Consumers Alliance, a nonprofit organization that helps people plan meaningful funerals that fit their needs and budget.
  • It helps some more than others. Unless the departed is a well-known community member or young person who met a tragic end, you’re unlikely to raise a lot of money. “The younger or the more well-known you are, the better you do,” confirms Fisher.
  • It may have unexpected consequences. An extended family member or friend may organize a fundraiser on behalf of grieving loved ones. After funeral expenses are paid, quarrels may arise on how to spend any excess money. Plus, donations may have tax implications for the family.
  • It looks like a money grab. Crowdfunding at times has been used for selfish gain. Fisher, who manages Fisher Funeral Chapel & Cremation Services in Lafayette, Indiana, has had parents claim they need donations to pay for an infant’s funeral when in fact he was providing the service for free. He’s also been scammed by organizers. “We’d go ahead and arrange for the service and then they’d never bring in the money,” he recalls. That’s why he created Fund the Funeral, which pays funds directly to participating funeral homes. “It just got to the point where I wasn’t trusting people anymore,” says Fisher. Fund the Funeral charges a 5-percent fee per donation; the payment processing company charges an additional 2.9 percent plus $0.30 per donation.
  • It puts the burden on loved ones. Funeral crowdfunding has the potential to foster the sense that others will pay your funeral expenses — that you don’t have to prepare for the inevitable. But this approach merely shifts the burden to loved ones. Loved ones “need to realistically know what money is there, even if that is a small amount,” so they don’t take on funeral debt on your behalf, says Slocum.

Under the right circumstances, funeral crowdfunding can be a thoughtful and efficient way to help those who truly need it. But whether you want to contribute to a funeral crowdfunding effort or you’re thinking of organizing one, be aware of what’s involved.

To learn about planning for funeral costs, read Helping to Cover Funeral Costs with Life Insurance.


SOURCES
1 Source: 2019 National Funeral Directors Association Member General Price List Study, published September 2019, https://www.nfda.org/news/media-center/nfda-news-releases/id/4797/2019-nfda-general-price-list-study-shows-funeral-costs-not-rising-as-fast-as-rate-of-inflation

2 Source: Bankrate Financial Security Index survey, January 2020, https://www.bankrate.com/banking/savings/financial-security-january-2020/

3 Source: GoFundMe, https://www.gofundme.com/start/funeral-fundraising, July 18, 2020

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