Creating a funeral plan in advance is a wise thing to do. Even a basic plan will be helpful guidance to your family when the time comes to make your funeral arrangements.
But should you enter into a prearranged contract for funeral goods and services? And should you prepay for that contract?
Here are some things to consider.
Pre-need Funeral Contracts
There are various good reasons to enter into a pre-paid contract for funeral goods and services in advance:
You have selected a funeral home and/or cemetery
It is common to choose a cemetery where other family members are buried or interred. You may want to pre-purchase adjoining grave or mausoleum spaces. This happens most often upon the death of a spouse and the surviving spouse purchases 2 adjoining spaces – one for now and one for later. You may also have a family history with a particular funeral home and have decided that they should handle your funeral. Whatever your reasons, if you have confidence in your choices of funeral providers then you may want to enter into a contract with them in advance.
Many providers will guarantee to deliver services and merchandise at today’s prices if you enter into a preneed funeral or burial agreement and pay for it in advance.
Ensure that money will be available
Pre-paying ensures that an amount you consider appropriate will be earmarked for the funeral.
There are pre-funding options that allow you to maintain greater control. Funeral trusts and funeral insurance are methods of pre-funding a funeral that involve making payments to third-parties (i.e., a bank or an insurance company) who will manage your funds until the time of the funeral. The third party will pay the providers when the pre-arranged services and merchandise are delivered. Generally, you have the right to change service providers, at any time, under either of these funding vehicles. Pre-funding with funeral insurance can help you manage the value of your assets. For example, funeral insurance is not counted as a personal asset in determining eligibility for assistance from social service programs, such as Medicaid.
State Laws Provide Consumer Protection.
Most states have laws requiring that providers set aside a certain % of prepayments received in a trust account. This pertains to goods and services that are promised for future delivery. However, the trusting requirement can vary from 30% to 100% and the provider manages the trust. You should be cautious about making prepayments directly to your provider if the purchased items are not immediately delivered, especially if the trusting laws in your state are lax.
Can you change a pre-need funeral contract?
If you have entered into a preneed funeral or burial contract, you need to carefully review the applicable terms.
- Is it flexible?
- Can you change the products and services?
- What happens if you move and want the funeral held in another city?
- Can it be transferred to another funeral director?
- What if the merchandise you have selected is no longer available at the time of the funeral?
- To what extent is the price guaranteed?
- Can the contract be cancelled?
Whether you have prepaid or not, the terms of your contract will govern whether you can make changes. Prefunding with a funeral trust or funeral insurance generally offers greater flexibility to make changes than if you make payments directly to your provider.
The Pros and Cons of Accepting Early Delivery of Funeral Products
Some buyers of pre-need funeral goods prefer delivery at the time of purchase to ensure that they have received what they paid for. You should consider whether this is important to you. Also, be aware that providers of pre-need funeral goods often prefer to make delivery at the time of the sale because ownership transfers to the buyer. This enables them to improve their cash flow by avoiding trusting requirements (see Funeral Trusts) and could influence the suggestions they make to you. Here are some things you should know about advance delivery of funeral goods and services.
- Certain pre-need items can be easily delivered in advance. For example, title to cemetery property is often conveyed to the buyer at the time of sale. In this case, you immediately own the rights to a specific cemetery plot even though it may not be used for burial until some indefinite time in the future. Grave markers are also often delivered at time of sale. The marker might even be engraved and set at the grave site in advance with the only remaining deliverable being to engrave the date of death.
- Many goods and services cannot be delivered in advance. The various services of the funeral director, as well as the cemetery’s services of opening and closing the grave, must occur at the time of the funeral. Also, mausoleum crypts are often sold before the mausoleum is built. If you purchase a crypt that is not yet built, your contract should provide a completion date with a full refund if construction is not completed by that date.
- Some funeral products can be delivered in advance but not without certain risks. For example, pre-need sellers may deliver products in advance by putting the purchased item in a storage facility until the time of the funeral. Be cautious if you choose to do this. For example, warehoused caskets and burial vaults can be susceptible to damage and deterioration if not properly protected.