A prepaid funeral plan is just what it sounds like. The plan allows you to plan and pay for every step of the process connected to your funeral or cremation. Some people consider a prepaid funeral plan as just part of their overall will and estate planning.
The idea is that by thinking ahead, you will save your family the stress of making quick decisions if you pass away without any plans having been made. This also gives you time to shop for the best plan and compare prices among funeral homes.
Generally, you make these plans with a funeral home that likely offers a smorgasbord of products and services. You choose the items that best fit your own wishes and then pay for only what you want.
How to Make Prepaid Funeral Plans
How you go about making your prepaid funeral plan depends on state law. In most states, only funeral directors may contract with you to make prearranged, prepaid funeral plans. If someone other than a funeral director is offering you a plan, ask to see a copy of the agreement they have with the funeral home you want to be in charge in order to be sure the person is authorized to sell you a plan that the funeral home will honor.
Check with the National Funeral Directors Association (NFDA) to be sure the funeral home you are working with is a member. The NFDA reports that as a condition of membership, funeral homes “are required to follow the NFDA Professional Code signifying their commitment to ethical business practices.” The NFDA helps you find an NFDA funeral home in your zip code.
It is a good idea to get the names of several homes and shop around. You will have many options and decisions to make. You can choose your own casket, what type of flowers you want, whether or not you want limousines for family members, what type of service you want, what headstone you prefer and what you want written on it, whether you prefer to be cremated and more.
You can even write your own obituary. The choices are yours and will be put into a written contract between you and the funeral home.
As you do your shopping, be aware of the Federal Funeral rule enforced by the Federal Trade Commission (FTC).
The Federal Funeral Rule
Recognizing that many loved ones are somewhat at the mercy of a funeral home when a loved one dies, the FTC enforces what is commonly known as the “Funeral Rule” found in the Code of Federal Regulations (CFR). The Rule applies to funeral homes and provides what some call a “Bill of Rights” for those in need of funeral home services. These rights apply whether a person is preplanning for his or her own funeral, or family members are planning after their loved one has passed away.
Some provisions of the Rule include, but are not limited to:
- The funeral home must give you prices over the phone if you ask for them.
- In face-to-face meetings, the funeral home is required to give you a written and itemized price list for the products and services you wish to buy. It is called the “General Price List (GPL), and the law requires it to include all items and services the specific home offers and the price of each one.
- If you are looking at caskets, ask for a price list before you view the caskets. There may be caskets available for purchase that are less expensive than the ones the home has on display.
- You do not have to buy a package. You should be able to select exactly the services and product that you want. For example, you may want only a memorial service with plans to buy a casket or urn elsewhere.
- If you decide to purchase a casket or urn online or from another vendor, the funeral home must accept it when it is delivered. The home cannot require you or someone else to be present when it is delivered.
- If the funeral home tells you that there are state laws that require you to purchase certain products or services, ask them to provide you, in writing, the laws they are referring to and why there are such requirements.
- If you are prearranging for cremation, the home must inform you about the less expensive alternatives to a regular casket. For example, all wood, fiberboard, or even cardboard may be used.
- No state requires routine embalming. Depending on the circumstances of the death, there may occasionally be such a requirement, but when preplanning, you need to know what your family members should expect. The funeral home may have its own preservation requirements even if the state does not.
After you have made your decisions about what you want from the funeral home, you are entitled to receive an itemized written statement with the individual cost of each product or service you wish to purchase.
Important Questions to Ask Before Signing A Contract or Turning Over Any Money
The Funeral Rule is designed to make sure you or your surviving loved ones are protected from fraud and deception. But, even with this protection, there are some important questions you need to ask before you sign any contract or pay any money.
- What happens if you move? Is your prepaid funeral plan transferable? It should be, but if not, ask what the administrative fees or penalty costs are for the transfer.
- Suppose you die while away from home. What will it cost to get your body to the funeral home?
- What happens to the money you have paid if the funeral home goes out of business for any reason?
- What happens to the money you prepay? Is it put in an interest bearing account? What happens to the interest? What bank is used? Talk to some references.
- Can you cancel the contract and have your money refunded?
You should have all of this information provided to you in writing. Even if all of your questions are answered satisfactorily, before you pay any money, you need to consider prepaid funeral plans pros and cons.
Pros of Prepared Funeral Plans
Those who have documented their wishes with a prepaid funeral plan report a great deal of relief and comfort. They know they are sparing their families the expense of a funeral.
In addition, those who preplan and prepay feel a sense of accomplishment since they are also saving their loved ones the burden of making serious, and possibly expensive, decisions while the family members are under emotional stress over the loss of their loved one.
Another pro is that if you have chosen specific products and services, the prices of those are locked in. Even if the specific casket you choose is no longer available years later at the time of your death, the funeral home will be obligated to provide a substitute that is comparable and not charge your family more for it.
A pro that is often overlooked because it is difficult for families to discuss, is what might happen if you have a need for expensive long-term medical care. You will be ineligible for Medicaid assistance if you have a certain number of assets. You are legally allowed to spend your assets on a prepaid funeral plan so that you can qualify for Medicaid.
Cons of Prepared Funeral Plans
There are no guarantees in life or death, but there are some downsides to prepaid funeral plans you need to be aware of.
- The funeral home may go bankrupt or out of business. No matter how careful you are with your selection of a funeral home, how meticulous you are with reviewing the contract, and no matter how much money you pay, there is always the chance they will go bankrupt or out-of-business by the time you need their services.
- If you cancel, you may not get a refund. It is almost definite that you will not get a full refund. Some states may require a partial refund. Check state law and your contract carefully so there will be no later surprises about this issue.
Be Sure Your Family Members Know About Your Arrangements
If you do make prepaid funeral plans, it is important that your family knows this and has access to a copy of the contract after you are gone. You should also give a copy to your attorney to keep for you.
Do not expect putting a copy of the contract in your safe deposit box to be helpful. After your death, family members generally do not have immediate access to safety deposit boxes, and might not even know that you have one.
It also unhelpful to leave the information in your will, since wills are often not read or found until after the funeral has already taken place. Your family will already have paid for your funeral or cremation, and getting a refund of money you or they paid will be difficult. Especially if they chose a different funeral home than the one where you had your prepaid funeral plan.