Crowdfunding Funerals May Be 'In' - but Here Are 3 Better Options

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people at a funeral
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For grieving families in a financial bind, crowdfunding has become an oddly popular way to pay for funerals. Yet as prevalent as sites to facilitate that have become, there are better ways to make sure your family doesn't have to deal with the stress of passing the virtual hat after your death.

The World of Funeral Crowdfunding

The trend toward crowdfunding funerals grew out of the popularity of broader social funding efforts. Kickstarter got funding from more than 1.1 million backers during the second quarter of 2014, raising more than $144 million and funding more than 5,700 projects successfully.

GiveForward has raised almost $110 million toward medical expenses for those in need, and it suggests funeral expenses as a reason for opening a new project. Specialized sites, including GracefulGoodbye and FuneralFund, help create memorial funds for the recently deceased and cover funeral expenses.

But as powerful as these campaigns can be when they're successful, they add a burden on a family grieving the loss of a loved one. Moreover, an unsuccessful funding project can leave families in an even more uncomfortable position.

Tips for Funding Your Own Funeral

The better option is to make provisions to cover your own funeral expenses:
  • Burial insurance. This is just another name for a life insurance policy with a relatively small death benefit. A policy limits payout to what's necessary to cover a simple funeral, such as a burial and an associated service. You can make monthly premium payments or make an upfront lump-sum payment to get coverage, but often, premiums can be relatively expensive compared to amount of coverage you get.
  • Preplanned funeral services. The idea is that you can lock in funeral expenses at their current cost, avoiding future inflation and also giving you the opportunity to make rational decisions about what kind of services you want rather than having family members deal with those questions while their emotions are still raw. State laws vary on how they work and what funeral providers are allowed to do with the money you pay.
  • Money set aside. For many people, the best alternative is simply to set money aside on a regular basis to cover your eventual funeral costs.
Invest for the Inevitable

Investments you make on your own behalf are likely to provide better returns than what prepaid funeral arrangements allow, and during your lifetime, you can use the your funeral fund as an emergency fund.

Obviously, you don't want to treat a funeral/emergency fund as an ATM for everyday expenses, but by letting that money do double-duty, you can protect yourself financially during your lifetime while also making things easier on your loved ones after your death.

To decide how much to save, one strategy is to find out how much burial insurance or prepaid funeral services would cost you. Then, funnel that amount over time into a separate investment account. By earmarking that money for death-related expenses, your family won't have any doubts about how to afford your funeral.

Crowdfunding a funeral -- when it works -- can be a nice way to let those who cared about you give a gesture of respect after you're gone. But to avoid the uncertainty and stress for those involved, the better alternative is to make sure the tab is paid beforehand.

You can follow Motley Fool contributor Dan Caplinger on Twitter @DanCaplinger or on Google+.​

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