Setting money aside for funeral expenses is a smart way to reduce the burden for loved ones after you're gone. With the cost of funerals on the rise, more people are looking for solutions to keep costs low while protecting their wishes. One option is to prepay for your funeral plans.
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When you prepay for funeral plans you put money aside to pay for services and expenses. This means when your time does come, your family doesn’t need to make big decisions about your end-of-life arrangements. Better yet, they don’t need to worry about how to afford the funeral cost. When it comes to who is responsible for funeral expenses, the burden typically falls on the family.
However, there are a lot of pros and cons of prepaid funeral plans. While it can be a smart, proactive option, it’s not a fit for everyone’s situation. In this guide, we’ll explore the pros and cons of prepaid funeral plans.
How Do Prepaid Funeral Plans Work?
First, what are prepaid funeral plans and how do they work? There’s a lot of misunderstanding around the entire funeral planning process, so it’s normal to have questions about prepaying and preplanning. When you put aside money and plans for a funeral, this is preplanning.
In most cases, prepayment for funeral plans happens through a funeral home. These arrangements are made in advance with a funeral home, and money is typically paid for these arrangements during the planning process. This lets someone make plans and pay for funeral arrangements before their death.
Many people are surprised by how long it takes to plan a funeral. With so many steps to consider, the more you plan in advance, the easier this process is for your loved ones. Additionally, paying in advance can also be more affordable. Funeral homes usually cater to prepaying customers with lower-cost packages.
When you do die, your family only needs to contact the funeral home to put these plans into action. While not everything is possible to plan in advance, this undoubtedly makes it easier to carry out your wishes when it matters the most.
Pros of Prepaid Funeral Plans
As you might expect, there are a lot of reasons to consider a prepaid funeral plan. By paying for arrangements in advance, you take an active role in your own final sendoff. Here are the biggest pros of prepaid funeral plans to determine if they’re right for you.
1. Reduce your family’s burden
The biggest pro of prepaid funeral plans is reducing the burden on your family. By taking care of the details of your funeral while you’re still alive, these decisions don’t fall on your family.
After the loss of a loved one, it’s normal to feel caught in your grief. This makes planning large services and final arrangements even more stressful. Instead, your family can focus on their grief and healing. Better yet, your family doesn’t need to worry about affording funeral arrangements which can cost several thousands of dollars.
2. Honor your personal decisions
Many people have strong feelings about their final arrangements and funerals. Even though you won’t be there for these things, it’s important to know your feelings on how you wish to be laid to rest.
By prepaying and making arrangements yourself, you’re completely in control. You can choose your casket, cemetery, plot, type of burial (or cremation), and the type of funeral you’d prefer. All of these decisions ease the uncertainty around your mortality and end-of-life plans.
3. Secure an affordable price
By planning and pre-paying for your funeral in advance, you can lock in today’s prices. Even if prices go up in the future, you don’t have to worry about handing over more money or having your family worry about the finances of your arrangements.
Because funeral prices are on the rise, this can be an effective way to save big in terms of funeral planning. In addition, most funeral homes offer cheaper packages if you pay in advance. Ultimately, with the high costs of funerals, this is often more affordable.
4. Choose your funeral home
If you have a funeral home you trust, odds are you want your family to go with this provider. When you prepay for arrangements, you’re limited to using this specific funeral home.
Since these packages don’t transfer, this can bring peace of mind knowing that your family is going with your trusted service provider. Many families are loyal to a specific funeral home, so this gives you the freedom of choice.
5. Save on your taxes
Though most funeral expenses aren’t tax-deductible for individuals, prepaying can sometimes save you on your tax bill. If your estate is used to pay funeral costs (such as if you have a prepaid plan), these expenses are seen as a tax deduction.
While you should consult with a tax professional before claiming any tax deductions, this might save your estate when it comes to filing your taxes. Considering the overall, big-picture savings is an important part of the planning process.
Cons of Prepaid Funeral Plans
While prepaying for a funeral can be a source of stress relief, it’s not perfect. There are a lot of things to consider before you decide whether this is the right option for you, and it’s important to understand exactly where your money is going. These cons below are a reminder that prepaid funeral plans aren’t one-size-fits-all.
6. Beware of funeral scams
Unfortunately, funeral scams aren’t unheard of. According to the Association of Certified Fraud Examiners, the most common funeral scams center around prepaid funeral packages. One company had a fraud scheme so large that losses were over $600 million total because of prearranged funeral costs.
To protect yourself, learn your state’s laws around funeral fraud and prepayment. In addition, always read the fine print and understand what your money is being used for before you agree to a plan.
7. You can’t transfer your plan
While it’s nice to commit to a specific funeral home, these plans don’t transfer to other service providers. Your contract is only with one funeral home, and this can be restrictive in some cases.
If you move locations (like to a new city or state), you will not be able to take your plan with you. The only exception to this is if you signed an agreement with a national funeral home chain, giving you more flexibility. If your funeral home of choice goes out of business, you might also be unable to receive a full refund.
8. There can be unexpected fees
Though you pay in advance, that doesn’t mean there won’t be other fees after you’ve died. Your funeral expenses might only cover a few different services. Your family might still be on the hook for additional payments or planning fees.
To protect yourself and your family, read the fine print before agreeing to any funeral payment package. Check specifically what’s covered and what’s not so there are no surprises.
9. Prepayment doesn’t cover all costs
There’s a common misunderstanding that prepaying for your funeral arrangements covers the cost of everything. In reality, prepaying doesn’t leave money for your family for other end-of-life expenses that might happen.
These added fees include medical expenses, third-party service providers, cemetery expenses, and so on. Unless you include specific funds for these additional costs, this money comes from your estate or your loved ones.
10. The funeral home might become your beneficiary
If you sign up for life insurance or final expense insurance, your family is typically the beneficiary. This means your family receives the full sum of your plan once you die. However, some funeral homes use your life insurance policy to pay for final arrangements with these prepaid plans.
What does this mean? In some places, this might mean your funeral director or funeral home makes themselves the beneficiary of your policy. When you die, these funds go to the funeral home. Even if money is left over after covering the costs of your final arrangements, this doesn’t always go to your family.
Understanding the Reality of Prepaid Funeral Plans
Most funeral directors and end-of-life professionals argue for pre-plans rather than prepaying. Planning your end-of-life wishes and funeral is always a good idea. However, don’t feel pressured to agree to a complicated package with a funeral home. Instead, talk to your families about your wishes and create a shareable plan online.
While prepaid funeral plans can be a way to get a good deal, always read a fine print. This is also a great thing to talk about with your estate attorney if you have one. For most people, prepaying for a funeral plan isn’t the right fit. Instead, make clear plans with loved ones and keep the line of conversation about your wishes open with those you trust the most.