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Advice about pre-paid funeral plans can help you make a sound financial decision and ensure your final wishes are honored. While the idea of easing the burden on your family is appealing, it’s crucial to understand the potential risks and navigate the process with care.
Here’s a breakdown of what to consider when you’re thinking about a pre-paid funeral plan.
The Risks of Prepaying
Pre-paid funeral plans are not without their risks. Consumers can lose money if a funeral home goes out of business, especially if the funds are not properly protected in a trust or insurance policy. Some plans are non-refundable, and others may not be transferable if you move. Additionally, some policies may not cover the full cost of future services, leaving your family to pay the difference.
Key Advice for Pre-Paid Funeral Plans
If you decide that a pre-paid plan is right for you, follow these steps to protect yourself and your investment:
- Shop Around and Compare Prices: The Federal Trade Commission’s (FTC) Funeral Rule is your best tool. It requires funeral homes to provide you with a General Price List (GPL) that itemizes all services and merchandise. You have the right to get this information over the phone or in person, which allows you to compare costs from different providers without pressure.
- Choose a Reputable Funeral Home: Research the funeral home’s reputation and financial stability. Look for a long-standing business with positive reviews and a strong presence in the community. You are entrusting a significant amount of money to this business, so a solid reputation is paramount.
- Read the Contract Carefully: Before you sign anything, scrutinize the contract. Understand the answers to critical questions:
- Is the plan “guaranteed” to cover all future costs, or will your family be responsible for paying extra if prices increase?
- Is the plan “revocable” (cancellable with a refund) or “irrevocable” (cannot be canceled)?
- Is the plan transferable to another funeral home if you move or the business closes?
- What exactly does the plan cover—services, merchandise, or both?
- Understand Where Your Money Is Held: Ask the funeral home how your money will be safeguarded. In many states, funeral homes are required to place pre-paid funds in a trust or a pre-need insurance policy. This protection is vital if the business goes under. Ask what happens to any interest earned on your money.
- Consider Medicaid Eligibility: If you are planning for Medicaid eligibility, you will likely need to purchase an irrevocable funeral plan. This allows the money to be spent down so it is not counted as an asset for Medicaid purposes. Be aware that most states have a limit on the amount that can be put into an irrevocable plan.
- Inform Your Family: A pre-paid plan is useless if your family doesn’t know about it. Tell your loved ones about your arrangements, and inform them where the documents are stored. Make sure they have a copy of the contract and all relevant contact information.
By taking these steps, you can make an informed decision and gain peace of mind knowing you have planned for the future while protecting your financial interests. For legal questions or concerns, consider consulting with an elder law attorney.
