The financial side of bereavement
It’s never easy whenever a loved one passes away. In addition to the emotional tug and the practicalities, financial issues can quickly come to the fore, and this can complicate the duties that need to be performed. That’s why it’s essential to understand the costs relating to dying and how these can be kept to a minimum.
Like most everything in life, even death comes with a price tag. People who’ve yet to experience what it’s like to lose a close family member are generally unsuspecting. In addition to the costs, in this period immediately following a loved one’s death, a whole series of administrative duties will need to be fulfilled, all while bearing the emotional burden of the loss.
To understand what’s financially at stake when someone passes away in Switzerland, the first stage is understanding what's written in the law. In a nutshell, the heirs take the place of the person who has died. Having the status of an heir confers rights but also comes with obligations. For example, the heirs must cover the costs relating to the death but also honour any outstanding invoices that have been addressed to the deceased. Where possible, these bills can be settled using the assets in the estate.
But that money comes with a ‘burden’ of its own. Every one of us has our own particular relationship with our finances. When emotions are running high, as they often are when a loved one has just passed away, differing viewpoints can come to the fore and cause friction.
As with several other issues that emerge during our twilight years (retirement, inheritances and advance directives), the watchword is anticipation. But then, we still must know what to anticipate. This is precisely what we’re going to analyse here, namely how much does it ‘cost’ to die.
Then we’ll look at how to plan ahead, including solutions to facilitate the paperwork, save money and help gain time for all the family.
These expenses can vary widely depending on the manner in which the deceased passed away. Medical costs in a narrow sense will depend on the excess linked to their healthcare insurance (which ranges between CHF 300 and 2,500).
If the medical treatment was expensive, there may be some extra healthcare costs to pay: 10% of any amount above the excess must be paid for, capped annually at CHF 700 for adults. In the event of an accident, potentially add in the cost of an ambulance or a helicopter, which may or may not be covered by the deceased's insurance. And if they fell ill abroad, repatriation costs may also be due for the portion not covered by the Health Insurance Act (in French, German and Italian).
Even if the person passed away at home, some medical costs will be incurred as a doctor must attend to certify the death. In that instance, there may be other costs to pay, such as for a locksmith.
Other costs in this category may also include invoices from the nursing home, rehabilitation centre or other care providers that will need to be covered on behalf of the deceased.
After medical treatment usually comes the funeral parlour. Prices vary from company to company, as do the services that each one offers – so much so that it’s hard to put a precise figure on the price of a funeral. This was illustrated by the investigative programme A bon entendeur, broadcast originally on 30 October 2018 on RTS (in French).
A basic undertaker service will include:
- transportation of the deceased
- provision of a place for viewing
- provision of a coffin or urn
- administrative procedures (such as informing the authorities)
There are also ancillary costs relating to the ceremony:
- notices in the local press
- rental of a venue for the ceremony
- hiring an officiating minister or another person to take the ceremony
- rental of a function room for the funeral tea
- drinks and snacks
- sending out thank-you letters
Then there are the expenses relating to the cremation or burial. The cost of a funeral plaque or stone can also be quite high.
As stated in the introduction, the heirs take the place of the deceased, inheriting their assets (chattels and money) but also their debts and unpaid bills. Bills may concern the following:
- rent (housing and parking space)
- moving out and/or storage room (to empty the flat or house)
- leases and other borrowings
- insurance policies (household, cantonal fire coverage, motor insurance)
- telephone and internet
- subscriptions (gym, newspapers, VOD subscriptions)
- any other outstanding invoices
The above cost items are the most obvious and can be planned for by the family of the deceased. But there are many types of hidden costs depending on the prior circumstances of the deceased and their inheritance arrangements.
First of all are the costs relating to the will (where one has been drafted). Depending on the canton, the will can be read by a justice of the peace (in Vaud canton, for example) or a notary (Geneva). This service is not free. In addition, the certificates of inheritance may be charged for. The total cost can amount to several hundred francs.
Other ‘unknown’ costs include:
- forwarding of the deceased’s post (52 francs for first-class mail)
- stationery (envelopes, stamps and printing) for cancelling services from companies or institutions that require a signed document
- certified ID (25 francs at post office counter; required by some banks and insurers)
- the unlocking of the deceased’s computer equipment at a specialised shop
Fortunately, there are not only unexpected costs. There are also free services that may be on offer. This is generally linked to the funeral arrangements. In Switzerland, some towns and villages offer their former residents grave sites at the local cemetery, or provide a place for the ceremony, all free of charge. Some may even cover the burial costs, for example in Geneva, Zurich, St Gallen and Basel-Stadt.
Some public-service pension funds also offer benefits to the families of deceased employees such as a lump-sum contribution towards funeral expenses or one or several months of wages paid to the surviving spouse.
At last we come to the final category of expenses that will determine the overall cost of passing away. One might think that if an inheritance triggers costs, then it must be quite substantial. But owning a house does not automatically mean a bank account overflowing with money.
Furthermore, notary fees will have to be paid if immovable property is part of the estate. The same applies if where there is an examination of assets and liabilities (carried out when it is assumed that the deceased had debts) or an official settlement, whereby the estate is managed by the authorities. The settlement can also be conducted by someone other than a state representative, namely an executor, who must also be paid.
Despite the cost, these possibilities may be a wise move, or may prove necessary in cases of complex inheritances or family disputes. It’s also such conflicts between heirs that are potentially the most costly, entailing considerable expenses such as lawyers fees, court fees and placing of seals.
To give you a clear idea of what the aforementioned procedures may cost, we’ve quantified an estimation, based on real-life experiences, which can be found here.
Where to start?
Although the list is long, so far we’ve only talked about money. But there’s still all the time and energy that goes into these procedures – time and energy that cannot be invested elsewhere.
So what can we do practically? Before undertaking any measures, the most important course of action may be reviewing your personal and family circumstances (French only) and your final wishes.
Then, the most judicious course of action is to discuss your desires with your heirs and relatives to avoid conflicts and misunderstandings.
Finally, depending on the information that emerges from this dialogue, several solutions can be considered.
What can be done to limit the costs relating to a death?
The nest egg
Let’s start with the simplest solution: keep some cash hidden somewhere. This is easy to constitute, as no procedures are needed, and it's flexible, since the money can still be used by the deceased before he or she dies. The money is immediately available to the heirs, although there’s no guarantee it‘ll be used for what it was intended. Bonds of trust must therefore exist between yourself and the people around you.
The biggest drawback is the safety issue. The money must be kept in a safe place that is known and accessible to the heirs. But it must be safe enough so that it won’t be found in the event of a break-in, or ruined through fire or water damage.
Advantages: ease of use, flexibility, readily available
Drawbacks: safety, indeterminate use of the funds
Keeping money set aside in a bank account – or setting up a savings account dedicated to your funeral expenses – is another option. It offers the same advantages as keeping cash but the money is held with a bank instead.
Again, this solution offers flexibility (the money is not tied up and can be used freely until one passes away) and can be accessed quite quickly, in return for a little paperwork.
The main drawback is that this takes time. If the only account holder is the deceased, it will take some time to get the money released. Usually this is possible once the certificates of inheritance have been provided, which may take weeks or maybe even months for the authorities to issue. And accessing this money can entail extra costs, such as fees for obtaining the certificates.
Advantages: ease of use, flexibility, safety
Drawbacks: can take a long time to access the money, and use cannot be guaranteed
Life insurance (or death benefits insurance)
The following solutions are increasingly tailored to death-related issues. A whole chapter could be devoted to the topic of life insurance, but here we’ll simply go over the basics. For more information on personal risk protection and retirement provision, see our article on the subject (French only). In this present article, the focal point will be what happens in the event of death (loss of earning capacity, which can also be covered by life insurance, will not be discussed here).
There are two types of life insurance:
- term life insurance, which pays out a benefit if the policyholder passes away
- mixed life insurance, which also has a savings component
For the purposes of this analysis, term life insurance will be understood to cover only death.
The policyholder determines a guaranteed sum for a set number of years (the ‘term’). This money is then received by that person’s loved ones (either as a lump sum or as an annuity) when that person passes away, if occurring during the lifetime of the policy. The policyholder pays an annual premium. There’s no savings component.
Mixed life insurance is more common because it’s more flexible – paying a death benefit but also yielding savings. If the policyholder is still alive when the policy expires, they receive the accumulated capital. This flexible hybrid model means that mixed policies can also be used for personal pension savings (3rd pillar, A or B accounts), which is quite common.
Whichever type of insurance is chosen, both offer a speedy solution, since payment of the benefit is not tied to the inheritance. There is therefore no need to wait for certificates of inheritance to be presented.
But even though life insurance is a cost-effective solution, especially term life insurance (which has low premiums), it’s not free. And as with any type of insurance, it’s important to pay attention to specific points when taking out a life policy:
- amount of coverage
- what is or is not covered by the insurance (e.g. death abroad or resulting from mental illness or suicide)
- risk scoring (supplements payable according to age and lifestyle – smoking, practice of extreme sports, etc.)
- flexibility (possibility of surrendering or transforming the policy).
In the end, as with the preceding solutions, the money will be available to the heirs, but there’s no guarantee that it’ll be used to carry out your wishes in terms of funeral rites, for example.
Advantages: guaranteeing loved ones a sum of money, readily available, safety
Drawbacks: procedures required, importance of reading clauses carefully, costs, lack of flexibility
If you would like to take out low-cost life insurance online, you can do so with us as well.
And this is the last of the options we’ll cite in this article. This is the solution most adapted to death-related issues and the related costs. As the name suggests, funeral insurance deals only with this aspect. And funeral parlours themselves offer this solution.
The principle is simple: plan for and pre-finance your funeral while you’re still alive. The main advantage is making sure that your wishes will be respected and that the money will be spent for that purpose.
But pre-arranging the ceremony has two sides. On the one hand, your children and loved ones will no longer have the burden of planning, paying bills and making decisions. On the other, they won’t have a say in how to bid farewell to the deceased. To avoid such situations, funeral parlours recommend planning the funeral as a family, or at least discussing it beforehand, as the following report from RTS shows (in French).
Funeral insurance relies on a relationship of trust with the funeral parlour. To reinforce this trust and add in some guarantees, the law obliges such companies to provide an equivalent service, in the event of inflation, or to reimburse the money received, in the event of bankruptcy. However, any increase in taxes (VAT or burial tax) is not covered by funeral insurance policies.
This solution, though not suited to everyone’s needs, has been a huge success in French-speaking Switzerland. In 2016, almost 15% of funerals had been paid for in advance, according to the newspaper 24 Heures (in French). The same finding applies to France, where this type of contract is also popular, even though some insurers are controversial (in French). In German-speaking Switzerland, it’s becoming increasingly common for people to write down their wishes in a document called an Anordnung im Todesfall. Pre-financing a funeral is a less common practice, however, though it has been gaining ground in recent years.
Advantages: money definitely used for its intended purpose, possibility of having one’s wishes respected, easing the burden on relatives
Drawbacks: money tied up during lifetime, coverage of funeral expenses only, limited scope for loved ones to make decisions
After examining the solutions on offer in detail, one might be tempted to ask which one is best. But that’s not the right question. Perhaps we should simply ask which solution is best suited to the circumstances. And that requires answering some simple questions:
- Who are the heirs?
- What might be the financial situation of the deceased?
- Will it be necessary to cover a sizeable amount of expenditure in a short space of time?
- What type of ceremony is desired, and what kind of budget?
- What is the heirs’ viewpoint?
Answering these questions and discussing them with your loved ones is a good way to save time and energy. This avoids getting lost in assumptions about “what he or she would have wanted” or rekindling past disagreements which – depending on their seriousness – can incur major expenses.
Furthermore, none of the above solutions are mutually exclusive. It’s quite possible to plan:
- a sum of money in cash to cover outstanding invoices
- term life insurance to give loved ones a financial safety net
- a funeral insurance policy to cover the costs of the ceremony, held according to your wishes
Other options can be added, all the time with the aim of saving time and money. As we’ve seen, the many procedures following the death of a loved one can be extremely time-consuming. It may therefore be wise to use a solution such as tooyoo to manage the transmission of your information and assets.
Basically, the most important thing is to listen to one another and have peace of mind. Because it would be a shame if our own death made life too complicated for us.