The cash crunch many employees face after a loved one passes away

When a loved one dies, the unfortunate reality is that surviving family members soon find themselves with a number of bills to pay.

The average funeral alone costs nearly $8,000 in the U.S. And in the weeks and months beyond that, families are faced with more responsibilities: everything from maintaining their loved one’s home to paying court fees during probate (during which they may need to hire a lawyer).

While in most cases expenses like these will eventually be repaid out of the estate, it’s important to keep in mind that it can take many months or even years to settle the estate, and someone in the family will need to cover these charges in the meantime. Empathy’s Cost of Dying Report found that over half of families (53%) had to deal with at least one debt.

In cases where the estate has so many debts or so few assets that it cannot reimburse family members who have fronted the funds for immediate needs, those family members simply lose the money. Considering that a majority of Americans have less than $1,000 in savings, according to 2022 survey conducted by Bankrate, even a short-term outlay can constitute a financial emergency.

For employees returning to work after a loss, these financial pressures add significant stress to a situation that’s already difficult.

The funeral

The most expensive thing families will pay for after a loved one is typically the funeral. And they must make a series of decisions when they are in deep grief and shock after a loved one’s passing: about the service, the casket (if there will be one), the final resting place, and more.

Each of these decisions has an associated cost. And according to the National Funeral Directors Association, the median cost of a funeral in 2021 was $7,848.

Again, the family will be reimbursed with funds from their loved one’s estate—but that may not happen for months or even years.

If a loved one pre-pays for their funeral and burial, that lowers the cash-flow strain on their family. But making arrangements for your own funeral is a rare step. After all, 54% of Americans did not have a will in 2021—traditionally the first step in planning for and providing for the loved ones who will live on after you.

Resolving financial matters

According to the Cost of Dying Report, the average total expense for handling financial matters is $4,384, including accountants’ fees and paying off bills.

Of this, $1,100 was paid to accountants to help handle financial affairs, and $1,624 went to paying bills.

There is also the immediate financial strain for anyone who financially depended on the person who passed away, whether that’s a surviving spouse, partner, or other family member.

In almost all cases, debt is not inherited in the U.S., so families are not responsible for paying a loved one’s creditors. But for spouses or others who have co-signed on home, car, or other loans, the debt that was previously managed by two people (and often two incomes) is now solely that person’s responsibility.

“The high cost of death, in both time and money, is one reason people should try to get their act together and make a plan for their own family well before dying,” says trusts and estates attorney Avi Z. Kestenbaum.

“Having a plan shortens the stressful process of probate and makes it easier for their loved ones. But unfortunately in the real world that does not happen much of the time. Most people don’t do any planning, and the ones that do usually do not plan enough.”

Other legal matters

The average family spent $4,967 on all legal matters, such as the court-supervised process of probate, the Cost of Dying Report showed.

During probate the assets of the estate are appraised and all debts are found and paid off before the estate can be transferred to its beneficiaries or heirs.

In many states, hiring a lawyer is required for probate, and even if it is not required, an attorney may be needed to settle complex estates or to work through family conflicts. The average family spent $885 to pay a lawyer and legal fees.

Even more costly: Selling a loved one’s home, which is common among families who may need cash to pay off estate debts or who want to divide the estate among multiple beneficiaries. Repairs to the house and cleaning it out to prepare it for sale cost an average of $1,461, while real estate brokers’ fees cost $918 and appraisals $1,732.

Support for employees under financial stress

How do employees meet these sudden financial obligations? The Cost of Dying Report revealed that 42.2% of families use credit cards or checking accounts and 36.1% dip into their savings, while only 14.4% use dedicated funds like life insurance or last arrangements insurance.

Faced with serious financial strain, on top of the grief from a loved one’s passing, many employees find their performance at work begins to suffer. Lowered productivity, less focus, more absenteeism, and even burnout can result.

To help ease their burden so they can focus on work, companies can provide relief for the short-term cash crunches that can occur after the death of a loved one. For instance, setting up an EAF (employee assistance fund) can offer immediate assistance that can be paid back. Alternatively, a salary advance can be all that’s needed for many employees to avoid a financial emergency.

Whether taking that step is feasible for a company or not, understanding what families face in the aftermath of loss is crucial in order to work productively with bereaved employees, who are carrying a burden that is too often misunderstood and underestimated.