Cemeteries are in a unique position compared to other companies as they aren't just making agreements that cover a few years or even a lifetime. Instead, the maintenance of the property is supposed to last forever. And to make things more complicated, a graveyard has a limited amount of inventory they can offer to fund those eternally-promised services.
TL;DR (Too Long; Didn't Read)
Cemeteries make money by selling goods and services, specifically items like burial plots, headstones and grave digging services.
How Cemeteries Make Money
Like any company, cemeteries make money by selling goods, properties and services. In this case, the goods and properties include items like:
- Gravemarkers or headstones
- Burial plots
- Construction of mausoleums
- Space in a columbarium (a building that holds urns containing cremated remains)
- Burial vaults
Cemeteries also sell services, which include:
- Digging and filling of the burial hole
- Opening and sealing of a mausoleum
- Sealing a columbarium
- Placing of gravemarkers or headstones
- Post-burial opening and re-closing of graves
The main thing a cemetery offers is a final resting place for a family's dearly departed, which means maintaining landscaping, protecting burial plots from vandals and thieves, repairing graffiti — essentially providing a clean, safe and attractive environment for descendants to visit in perpetuity.
Graveyard Burial Plot Costs
You might think the fact that a graveyard has limited space and can only sell so many plots might mean that the burial plot is the most expensive thing a cemetery sells, but this is actually one of the most inexpensive aspects of a burial. That's because cemeteries offer low pricing on burial plots to get people to commit to their burial grounds rather than the competition.
Families often want to invest in family burial plots and selling the land off for cheap can help guarantee that a whole family will buy their space together long before the youngest of the family is anywhere near their average life expectancy, meaning the cemetery will be guaranteed the opportunity to sell other goods and services, such as burial and headstone installation, to each of the family member's heirs when that person's time comes.
Another reason that burial plots are so cheap is that state family cemetery laws (which cover any cemetery on private property) often require the business to put as much as 10% of the cost of all plots into a "perpetual care fund" to ensure the space is cared for throughout eternity.
Burial Plot Pricing Factors
While the price of burial plots is generally cheaper than the price of other services and goods sold by the cemetery, burial plot prices will vary dramatically based on a number of factors, including the location, type and time of the purchase. The biggest factor affecting burial plot pricing is where the plot is located. As you might suspect, plots in crowded areas where land prices come at a premium, such as California and New York City, may cost far more than places in less crowded areas such as rural Wisconsin. On a smaller level, where the plot itself is located inside the graveyard can impact the price as well — it only makes sense that a hilltop plot with a view will cost more than one tucked up against the fence facing the freeway.
There are different types of plots a person can choose to purchase in the cemetery. The most common are those designed for individuals and those for couples. Couples plots can be located side by side or be designed to go extra deep, so one person's coffin will be laid upon the other. Naturally, those made for a single person are less expensive, though they may be more expensive per person.
Finally, in almost all cases, the earlier a person purchases a burial plot, the less it will be. This is not only due to inflation, but also because new cemeteries need to sell off space and hopefully get enough prepaid plots to cover their early expenses. As space fills up and people want to be buried beside their loved ones who have already been interred, the price begins to increase. This is the main reason why many people buy plots long before the end of their life.
Other Cemetery Money Makers
Aside from the burial plot, the majority of other goods and services sold by a cemetery can be pretty pricey. A good headstone can be notably expensive and while these can be purchased from other suppliers, the cemetery will always get paid in the end as the installation fee associated with placing a headstone can cost as much as twice the cost of the burial plot. Then there are the costs associated with digging and filling the burial hole, which is what helps cover the cost of the undertaker and landscaping staff's salary. If a grave must be exhumed and reburied at any time, then a similar fee will apply again.
Additionally, many cemeteries now have funeral homes on the premises, which allows them to sell package deals on funerals and burials. Those with funeral homes can make money on services like embalming, caskets, services, cremation, urns, etc. Many funeral homes even partner with florists and caterers so they can earn money by referring customers to these companies as well.
Changes in the Industry
It's worth noting that the funeral industry has been undergoing major changes in the last century. While historically Americans have preferred to be buried, changes in public opinion and the increasing cost of burial have led to a drastic change in the number of people who choose to cremate their loved ones rather than bury them. In fact, in 1960, only 3% of the deceased were cremated. In 2016, for the first time ever, the majority of American funerals involved cremation, with 50.2% choosing this option. Some experts believe that by 2035, cremation rates in the U.S. will reach 78.8%.
Although numerous factors are playing into this change, a major consideration is the hefty cost of burials vs. the relatively inexpensive price of cremation. In fact, the average burial cost $7,300 in 2016, whereas the average cost of cremation was only $1,650. As the amount of land available for graveyards continues to decrease, the price of burials is expected to continue to rise dramatically. While many people choose to release the ashes of a cremated loved one or keep the remains at home, the prevalence of columbariums at cemeteries will continue to rise as cremation becomes more and more popular.
While it is easier to make space for columbariums in a graveyard, few families want their loved ones to be laid to rest in an area filled with constant construction, so these structures will almost always be completed before the cemetery (or at least that portion of the cemetery) is open. As such, the number of spaces available for cremation urns is generally set from the initial opening date of a cemetery or a cemetery section, just like the number of burial plots.
Expenses Related to Cemetery Ownership
There are many costs associated with owning a cemetery. Undertakers, landscapers and security officers need salaries; burial vaults, mausoleums and columbariums all cost money to build; water is needed to keep the landscaping green; and many cemeteries have at least a few lights that are left on at all hours of the night. In the beginning, most of these expenses are covered by the price of the goods and services sold. But burial plots and columbarium spaces are limited by the amount of space available to sell.
Eventually, space runs out and while the cemetery may get occasional income through the exhumation or reinterment of preexisting graves or the installation of a new headstone, the company's main revenue sources have all dried up. Even if the business no longer has to employ full-time undertakers (although they will still need to work with someone in cases of exhumation or reinterment), landscapers and some kind of security are still required. So then there's the question of how a cemetery can actually continue to pay for its operation costs, and that's where the "Perpetual Care Trust" comes in.
The Perpetual Care Trust
The International Cemetery, Cremation and Funeral Association (CCFA) defines Perpetual Care Trusts as "funds, to be held in perpetual trust, the income of which is to be expended in keeping up forever the necessary care of the individual lots and graves, and maintenance, repair and future renewal of the borders, drives, water and sewer systems, enclosures and necessary buildings." In other words, it's a fund to maintain the land and buildings for the rest of eternity.
While many states require a portion of all burial plots be put into a perpetual care trust (sometimes as much as 10%), not all states have such a requirement and some counties and other local municipalities have their own requirements. Even when there is no legal requirement, the CCFA still pushes its members to voluntarily put money aside for this purpose. As such, the amount a cemetery puts away for the perpetual care of a property will vary, but, in theory, the interest from this fund should be enough to pay for upkeep.
When Cemeteries Fail
While it's rare, sometimes cemeteries fail to earn enough to stay in business, usually after all the plots have been filled. When this happens, the cemetery may go bankrupt or even just be abandoned. For the family members of those who have prepaid for burial plots, this can be a particular challenge. In some cases, the court will allow the family to hire someone to dig up the already-paid-for plot so the burial can commence, otherwise, the family will need to find another burial plot somewhere else, or wait until the courts and banks work out what should be done with the business and the land.
There is no set guideline as to what will happen after this. In some cases, the city or county may take over the land and manage it from that point on, sometimes through the use of municipal employees and sometimes with the help of volunteers. Should there be a perpetual care fund in place, the city or county will claim it for these purposes. In other cases, the owner of the property may be granted permission to sell the unused portion of the property for commercial or residential development.
While uncommon in the U.S., the courts may sometimes even choose to give the owner permission to sell off the land that has already been used for burials for commercial or residential purposes. When this happens, the former cemetery owner or developer may be ordered to move the bodies first. But shockingly, sometimes the bodies will not be required to be moved first and it will be left up to the relatives of the deceased to move their family member's remains before development begins.
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- NearSay: Do You Have to Buy Headstones From the Cemetery?
- Today I Found Out: What Happens If A Cemetery Goes Under?
- BurialPlanning.com: Cemetery Burial Plots for Traditional in-Ground Burials
- Marketplace: How do Cemeteries Make Money