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Is a Prepaid Funeral For You?

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.

Think twice?

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.”

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Anonymous   |     |   Comment #1
Who wants to talk about this on a sunday morning? If you do get buried they will dig you up some day and say wow, a mummy..hehehe 
Paoli2   |     |   Comment #2
Ok Sheryl now you have bite into an issue that is very personal to me.  I read tons of stuff on why I should not prepay funerals etc and guess what.  "I" still decided it was best for our interests for us to do so.  When we "had" to move to another state and city due to Katrina destroying our home, the first thing we did (at my insistance) was to make a list of the "best" family run funeral homes and went to visit them all.  I stayed to see how they handled real funerals and checked out caskets and went to see them.  I found who was the best casket maker at the best price and got helpful info from the guy who was selling us our plots as to what to pay and not pay for a casket.  I think I could MAKE my own casket after all of them I saw.  I found out what was worth paying for in a casket and what was just luxury add ons.  I bought all our plots, and prepaid for the funerals at the best family funeral home which has a BBB rating.  I also made sure that IF we had to move the prepaid policies would be acceptable at ANY funeral home in the nation and if we ever changed our mines we could get a refund.  We are seniors and I was not taking any chances that when my time comes, DP would be too confused to make sure we were buried properly and vice versa.  One never knows what state of mine they will be in in their later years and if you don't have family or friends to take over your burial, you had better make sure you do it ahead of time, imo.  I have a DD who I also needed to prepare for so she has everything paid for her once we are gone. 

Prepaying a funeral is not an easy decision but one has to take into consideration their ages and where they are living in their old age.   Now that interest rates have crashed and we have no idea what will happen in the future, I am really glad I put all that money towards our last days.  It must be done with a lot of research so it is not something one should jump into without knowing all the facts.  You have written so much about what we should do while alive, I was wondering when you would get to letting us know how to handle our "passings".    Been there, done that but thanks anyway.
Alan   |     |   Comment #3
In the case of prepaid cremation, such as the Neptune Society, I think prepayment makes sense.  Since you have decided that you do not wish to have a formal funeral service, but perhaps a distribution of ashes at sea, prepayment removes a heavy financial and emotional load from your surviving relatives, especially if you have previously made your wishes clear in advance.  Your relatives can honor your wishes and be spared the emotional stress of casket selection, plot selection, etc at a time of grief.  One phone call inititates the wishes of the deceased, which, after all, should be the primary concern.
Paoli2   |     |   Comment #4
Alan, you must work for this Neptune Society.  More and more people are opting for cremation since it is so much cheaper but I can't stand the thought of it.  That is one of the reasons I made sure everything for us was paid for so no one could do that to us.  I didn't even like having our former "cat" cremated!
Anonymous   |     |   Comment #5
Keynes said we're all dead in the long run.  A corollary is that we're all dead by the time the self dealing fed stops interfering with interest rates.
Anonymous   |     |   Comment #6
What the h*** does this have to do with getting the best deals on bank accounts?
Anonymous   |     |   Comment #7
#6  How are you going to pay for your funeral if you don't get the best deals on bank accounts?  It's all about needing money no matter what we do. That is unless you plan on using a "Pauper's grave"!
darkdreamer4u   |     |   Comment #8
Couldn't care less - when I'm dead, I'm dead, period.
Anonymous   |     |   Comment #9
Sheryl. Social Security only pays $250 for your funeral arrangements.
I guess you can make your own coffin with the amount you get and arrange burial in your own back yard.
Anonymous   |     |   Comment #10
It's illegal in most cities...
Anonymous   |     |   Comment #11
Anonymous - #10, what they gonna do if it is illegal, give you a ticket to pay, if not, they will re-bury you for free in the city graveyard.
Anonymous   |     |   Comment #12
#11  No they will probably give the fine or ticket to your partner or spouse unless you plan on having a "we go together" departure.  I think it is against the Health laws to bury anything but pets in your own backyard.  Also, how are the big graveyards going to make all that money if we start digging in our own yards?
Anonymous   |     |   Comment #13
I don't know if it is better to preplan or not.  I just finished paying off a funeral for a relative.  Total cost was over $11K (all cemetery, funeral home, and grave marker charges).  I still have the bills from when my grandfather died (back in 1977).   Total cost from that time (all cemtery, funeral home, and grave marker charge) was under $3K.  The funeral merchandise used was nearly the same type between the two funerals and the only extra charge was for the recent funeral was a Sunday weekend surcharge.
nospam4me   |     |   Comment #14
My grandmother pre-paid into a trust for her cremation.  There was some financial mis-management of the trust funds, but my grandmother had died and her cremation paid for before the financial issues became a problem. If I was going to pre-pay for a funeral, I would be very cautious about the financial solvency of the trust into which I was pre-paying.  http://www.ifdatrustsettlement.com
Paoli2   |     |   Comment #16
I have such peace of mine knowing when we go everything has been selected and paid for.  In fact we even have our apartment across the street from the graveyard so I can wave to it as we drive by each day!  The only thing in my life I don't have to worry about is dying! :)