Pre-Paid Funeral Plans
Should I Get One Now?
When my grandmother died one year shy of the century mark, it was truly a mixed blessing. She had always been feisty, sharp as a tack, and she lived on her own well into her 90s. At 96 though, her old bones were so brittle that when she fell one day (as so many seniors do), she broke her back. She needed care we couldn’t provide at home, and we had to move her to a nursing home. After her fall, Grandma became more and more forgetful. Eventually, she couldn’t recognize her children or remember major life events. Less than six months later, the doctor confirmed she had developed dementia.
In her last week of life, small and frail, Grandma couldn’t even help us make the decisions about her medical care and end-of-life. During that week while we were getting her affairs in order, we found Grandma’s final gift to us – a pre-paid funeral plan. We didn’t know it, but she’d made all of her arrangements many years before. Grandma knew that when the time came, any grieving family might be overwhelmed by worries about which funeral home to use, burial or cremation, where to place her remains, what kind of service, and of course, how to pay for it all.
We don’t like to think about it, but we all know that death is inevitable - so advance planning is certainly worth considering. One option is to enter into a “pre-need” or “pre-paid” funeral and/or burial plan, like Grandma did. By making this plan, you and your selected funeral home agree on all the details, large and small, of your funeral and burial arrangements and an itemized list of the costs is provided for your records. Your advance payment is protected by a trust, an escrow account, or an insurance policy. With the average cost of a funeral at around $6,000, and extras like flowers, obituaries, and limousines boosting those prices to closer to $10,000, this can be a real relief to families who can focus on the loss of their loved one, and not have to worry about money.
The pre-need funeral plan has become very popular. An AARP survey in 2007 showed that nearly a quarter of all Americans over 50 participate in some form of pre-paid funeral plans. Clearly, pre-paid funeral planning is becoming big business, especially as it becomes more and more popular among America’s baby-boomer generation.
Is there a catch? Generally not, but there are some details you need to know.
The Law and Pre-Paid Funeral Plans
Pre-paid funeral plans are a contractual agreement regulated by most states. Each state regulates differently, so you should know: (1) how your state’s law controls the plans and what they can provide, (2) how the plans are funded, and (c) your recourse in the event of fraud or default.
Summarizing the Benefits of Pre-Paid Plans
• Your peace of mind knowing our funeral and burial arrangements are to your liking.
• The comfort of knowing that there will be vastly less burden on your family, especially at a time so stressful that they are vulnerable to manipulation.
• Knowing that your family won’t have to take out loans, arrange complex or expensive financing plans, or sell assets to pay for funeral costs.
• Guarantees (in many such plans) that if the items and services purchased become unavailable, equivalent substitutes will be provided at no additional cost.
• Guarantees (in many such plans) that prices will not increase over time.
• If your plan does not guarantee future pricing, anticipated increases may be offset by the interest earned on your purchase price.
Things to Keep in Mind When Setting Up a Plan
• There may be no refund in the future if someone wants to cancel the plan.
• There may be no transfer options if you move to another state.
• In some contracts, interest earned on your advance payment can result in excess money not used, which may be retained by the funeral home or director.
• In some plans funded by an insurance policy, there may be a waiting period. If the insured dies too soon, few or no benefits are paid at death and the family is forced to pay for the difference.
With a bad apple in almost every barrel, you should be careful to do business only with scrupulous funeral homes. Too much pressure to buy, or a refusal to supply a full list of detailed costs, are red flags. If you’re not familiar with written contracts, ask somebody for help. Be certain to do these things:
• Know exactly what will happen with your advance payment. Ask the funeral home bank they use. The funeral home is required to explain this to you.
• Ask about refunds and cancellations. What circumstances will allow you cancellation? How much money will be refunded? Can you transfer the funds to a different funeral home if you move far away? The answers to these questions should be written in your plan.
• Read the fine print. Your pre-paid plan is a contract and details can vary greatly. Look for hidden costs or extra charges. Be sure you understand the provisions concerning guaranteed costs.
• Check references. If you have any question about a certain funeral home or director, you can contact the State of Michigan’s Office of Attorney General, Department of Licensing and Regulatory Affairs (LARA) at 517 241-9288 or 517 241-9202.
Article provided by Lisa H. Beatty, Attorney at Law, Nawrocki Center for Elder & Family Law, PLLC, Brighton, MI