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Prepaying your funeral
Sometimes people choose to make funeral planning easier on those left behind by placing funds in a special account or pre-paying a funeral. Keep in mind that there are pro's and con's of funeral prepayment and they vary from state-to-state.
Advantages
- Comparison shop for prices on products and services: The cost of caskets and professional services can vary dramatically. Obtaining a from each funeral home will allow for a better, more informed decision.
- Reduce risk of rising costs: Negotiate a contract that allows the purchase of tomorrow's merchandise and services at today's prices. (The guarantee, however, is only as good as the word of the funeral home that stands behind it.)
- Shelter funds: If necessary, funds can be placed in an irrevocable trust for Medicaid or estate planning purposes.
- Obtain peace of mind knowing that others will not have to make final arrangements
Disadvantages:
- Arrangements may not be portable: Clients may not be able to shift their arrangements to a new location unless they leave the state.
- Prices may not be guaranteed forever: If the funeral home did not guarantee their prices, and those costs inflate faster than the growth of the monies on deposit, a client will be forced to substitute less expensive merchandise or provide additional funding.
- Penalties may be lurking: If a prepaid funeral contract is cancelled, the client may not be eligible for a 100 percent refund.
- Costs can be misunderstood: In many states, part or all of the interest earned on an account may be withdrawn each year by the seller as part of his/her administrative fees, but you may be responsible for paying the taxes on that interest.
- Survivors may not have knowledge of the arrangements: The specifics of a client's pre-paid funeral should be made known to close family members, otherwise that money can be lost.
- Funding may be irrevocable: Consider carefully before accepting an irrevocable agreement. They are helpful when eligibility for Supplemental Security Income (SSI), Medicaid or other public benefits are being determined, but they may limit flexibility.
- The funeral home may not be in business: The seller of today's funeral services may not be in business at the time of the account holder's death.
In summary, pre-paying a funeral is a nice gesture for family members who must make the arrangements, but caution should be taken. Consult The Survivor Assistance Handbook for ways that you can guard against the disadvantages of pre-planning your own funeral.
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