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Tuesday September 21, 2021

Savvy Living

Savvy Senior

Should You Pay for Your Funeral in Advance?

My wife and I have been thinking about preplanning our funerals now so our kids will not have to later, but we would like to find out if it is a good idea to prepay. What can you tell us?

Planning funerals in advance is a smart move. Not only does it give you and your wife time to make a thoughtful decision on the type of service you want, it also allows you to shop around to find a good funeral provider. Additionally, it will spare your family members from making these decisions at an emotional time.

Preplanning a funeral does not mean you are required to prepay. In fact, the Funeral Consumer Alliance, a national nonprofit funeral consumer protection organization, does not recommend it unless you need to spend down your financial resources to qualify for Medicaid.

Preneed Arrangements


Most funeral homes today offer what is known as "preneed life insurance plans," which allow you to arrange for the type of funeral services you want and prepay with a lump sum or through installments. The funeral home either puts your money in a trust fund with the payout triggered by your death or buys an insurance policy naming itself as the beneficiary.

If you are interested, make sure you are being guaranteed the services you specify at the contracted price. Some contracts require additional payments for final expense funding, which means that if the funeral home's prices increase between the time you sign up and the time you pass away, somebody will have to pay the difference. Here are some additional questions you should ask before committing:
  • Can you cancel the contract and get a full refund if you change your mind?
  • Will your money earn interest? If so, how much? Who gets it?
  • If there is an insurance policy involved, is there a waiting period before it takes effect? How long?
  • Are the prices locked in or will an additional payment be required at the time of death?
  • Are you protected if the funeral home goes out of business or if it is bought out by another company?
  • What happens if you move? Can the plan be transferred to another funeral home in a different state?
  • If there is money left over after your funeral, will your heirs get it, or does the funeral home keep it?
If you decide to prepay, be sure to get all the details of the agreement in writing and give copies to your family so they know what is expected. If your family is not aware that you have made plans, your wishes may not be carried out. Make sure you inform your family that you have prepaid for your funeral costs, so they do not end up paying for the same arrangements.

Other Payment Option


While paying for your funeral in advance may be a convenient option, there may be other options available.

For example, if you have a life insurance policy, many policies will pay a lump sum to your beneficiaries when you pass away, which may be used for your funeral expenses. The payment is made soon after you pass away and does not have to go through probate. Any excess funds not used for funeral expenses will be part of the inheritance to your heirs.

You could set up a payable-on-death (POD) account at your bank or credit union, naming the person you want to handle your arrangements as the beneficiary. POD accounts are also called Totten Trusts. With this type of account, you maintain control of your money while you are living, so you can access the funds in an emergency, collect the interest and change the beneficiary. When you pass away, your beneficiary collects the balance without the delay of probate.

Savvy Living is written by Jim Miller, a regular contributor to the NBC Today Show and author of "The Savvy Living" book. Any links in this article are offered as a service and there is no endorsement of any product. These articles are offered as a helpful and informative service to our friends and may not always reflect this organization's official position on some topics. Jim invites you to send your senior questions to: Savvy Living, P.O. Box 5443, Norman, OK 73070.

Published April 30, 2021
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