Is a Prepaid Funeral For You?
You've heard the mantra to plan, plan, plan. But does that mean you should plan your funeral too?
Like an insurance plan, preplanning a funeral protects against inflation and preplanners can rest-assured that what they agreed upon at the time of the arrangement will be the price they or their family pays when the time comes – be it a month or 50 years down the road, says Marla Noel, president of Fairhaven, a mortuary and memorial park. “Preplanning protects the family from facing an unforeseen financial burden at an already traumatic time.”
No doubt, “It's emotionally appealing because it's far removed from the trauma of death,” says John Graves, principal with The Renaissance Group.
Then too, there's another advantage of pre-paying. If an individual expects to need state or federal assistance, such as SSI or Medicaid, to pay for end-of-life medical care, money set aside in certain types of funeral or burial trusts is not counted as an asset when the government determines a person's eligibility for such benefits, says Jessica Koth, public relations manager for the National Funeral Directors Association. “Laws about this vary from state to state. A licensed funeral director can provide guidance to families in situations like this,” she adds.
Prepaying made sense for writer Sandra Beckwith, who prepaid her mother's funeral before she applied for Medicaid for her. “It's the only transfer of assets that Medicaid allows. We decided that it was smarter to invest mom's savings in her funeral expenses, than it was to give that money to the government.” While she prepaid all of the estimated expenses, she says you can pay as little or as much as you like.
But for all the advantages of prepaying, there are some real issues. “Plan ahead but do not pay ahead,” says Wayne Derrick of the Funeral Consumers Alliance of Houston, a non-profit. He says you're far better off filling out documents to indicate how medical issues are to be handled, appointing an agent for disposition of remains, with alternates in case the initial agent is not available, and by all means have a will. He points to Final Rights by Joshua Slocum and Lisa Carlson and You Only Die Once by Margie Jenkins as good resources.
“The advantages of prepaid funerals mostly go to the funeral directors. They tend to talk people into committing much more money than they should be spending without competitive offers. They also tend to tie the people to a particular funeral home,” says Derrick.
It's not like you'll necessarily save money. “I have never seen a prepaid agreement that is even close to what could be obtained elsewhere. The client is generally steered to a much more expensive casket, and many more expensive options, but the plan seldom includes cemetery charges, which can add thousands of dollars, he says.
There are other drawbacks, “A key point when it comes to Medicaid is that the prepayments have to be irrevocable, meaning, that once you give that money to the funeral home, you can't get it back. You have to be certain that you want to work with that particular establishment,” says Beckwith.
Furthermore, many people end up moving before they die, and they end up with extra expenses for shipping the body. “If you change plans or move, you're not likely to get all your money back. Or it can be embezzled,” warns Lisa Carlson, executive director of the non profit, Funeral Ethics Organization.
Even the Federal Trade Commission urges caution. “Protections vary from state to state, and some state laws offer little or no effective protection. Some state laws require the funeral home or cemetery to place a percentage of the pre-payment in a state-regulated trust or to purchase a life insurance policy with the death benefits assigned to the funeral home or cemetery. Most funeral providers are professionals who strive to serve their clients' needs and best interest. But some aren't. They may take advantage of their clients' through inflated prices, overcharges, double charges or unnecessary services,” the FTC explains on its website.
If you decide to go the pre-pay route, “Include a licensed funeral director in the process so you have all the information you need to make an informed decision and help ensure your wishes are carried out,” says Koth. She also recommends reviewing the National Funeral Directors Association's Bill of Rights for Funeral Preplanning.
Ask questions. If you're paying over time, what will the total payments be? What happens if your circumstances change and you can no longer afford to keep making payments? What if you move? What happens if the firm you dealt with goes belly up? Better know the answers to these questions and plenty others.
If you don't, you could be sorry. The personal injury law firm of Chalik & Chalik recently filed a lawsuit in Broward County Circuit Court in Fort Lauderdale on behalf of 22 family members who alleged that the owners, operators, managers and supervisors of two South Florida cemeteries buried bodies in their loved ones' graves.
“When these large companies went on a spree in the 1980s and 1990s to buy up locally-owned cemeteries, they didn't do anything resembling due diligence to audit which graves were already sold,” said Josh Slocum, executive director of the Funeral Consumers Alliance, a non profit, in a prepared statement. “In their haste to make profits for their shareholders, they sent these pre-need sales teams out and now these chickens are coming home to roost.”
Indeed, some funeral homes have been in trouble for pre-selling funeral plots and not having them available when people die and need them.
Says Carlson, frankly, “Generally, prepaying is unwise.”