The loss of a loved one is a confusing time for all those who experience it. Emotions are in turmoil, and those left behind have to find a new normal. In the midst of such a whirlwind, you don’t want your loved ones to have to sift through the confusion of planning a funeral. Prepaying for a funeral is a way to mitigate confusion, expenses, and stress in the wake of losing someone dear.
People know it is important to save for big purchases: buying a home, planning a wedding, going on vacation. However, often funerals do not make that list. We understand: putting pennies in a jar for a beach house in Cabo is exciting; setting funds aside for a funeral is not. Funerals are also a lot more expensive than most people realize. Generally starting around $7,000, it is wise to make a financial plan before the dreaded day.
How Does Prepaying for a Funeral Work?
One deterrent for people prepaying for a funeral is simply not knowing that they can. In fact, there are two general types of prepaid funerals. Each has its own pros and cons, and the best choice for you is dependent on your preferences; there is no definitive best way to prepay for your funeral. Money is set aside in either a trust or an insurance policy, and the money can be dispersed by the family or paid directly to the funeral home.
Insurance Policy
Did you know you could pay for a funeral with life insurance? Using an insurance policy to prepay can go one of a few ways. Sometimes you can make all the arrangements and payments with your mortuary, and they will set up an insurance policy, listing themselves as the beneficiary. You also have the option to set up your own insurance policy. From there you can list the funeral home as the beneficiary or someone you trust to carry out your funeral plans as you stipulate.
Trust Funds
Another option for prepaying for a funeral is to establish a trust. Payments for this option are made in installments. Trusts can be either revocable or irrevocable. A revocable trust maintains you as the owner of assets, so you can cancel or cash-out the trust at your discretion. Medicaid can also remove money from a revocable trust if other assets are not available. An irrevocable trust cannot be changed by anyone except the trustee. This agreement means you sign away ownership of the money in the trust, and so it is excluded from your assets in the determination of Medicaid and Supplemental Security Income (SSI).
Every mortuary and funeral home will have different plans with different coverage. The services offered will also be different depending on the company with whom you book. As a general rule, however, the basics of a burial service are covered: casket or cremation, basic funeral services, transportation to/from the funeral, cemetery plot and headstone, and flowers. Funeral insurance policies will require a health questionnaire, and the answers will determine the type of coverage available.
What Are the Pros of a Prepaid Funeral?
We’ve explained a bit how to prepay for a funeral, but is it actually a good idea? If you have specific wishes for your funeral, a prepay option is likely a good fit for you. Prepaying makes sure you get the funeral you want, meeting religious, cultural, and personal preferences without leaving grieving loved ones to guess.
Prepaying for a funeral reduces the burden on family and friends in other ways too. It makes sure that all the planning and finances are covered. Many people are shocked at just how long it takes to plan a funeral. Planning beforehand gives you an extended window to ensure that you have all the details the way you want them to be and that loved ones don’t feel pressed to make all the decisions under pressure.
They also don’t have to pay for everything at once since pre-payments can also be made in installments. Additionally, some prepaid plans lock in the price, which prevents any unpleasant surprises if prices otherwise increase over time, often making prepaying a cost-effective option.
Disadvantages of Prepaid Funerals
Just like any major purchase, there are some risks involved in prepaying for a funeral. For example, if anything happens to the agreed-upon funeral home or if you move, you may be stuck depending on the type of prepaid funeral plan you used. A refund may not be available. If funds do transfer, any discounts in the original agreement may not be commutable.
If you run into a snag after prepaying for a funeral, changes to the final plan may not be available depending on the contract, but if they are, changes will not apply to the final disposition (burial vs. cremation). To change the final disposition, the contract must be canceled and restarted. Always understand your contract thoroughly before signing a prepay agreement.
Check With Your Provider
Every funeral and every prepayment plan is individual. Check with your mortuary or funeral home to choose the right coverage type and amount for you. Here are a few things to make sure you know before you sign:
- Know whether or not your funeral expenses are tax deductible
- Be sure to understand the terms of your contract: revocable vs. irrevocable
- Work with your funeral home to determine what is and is not included in a prepaid funeral
- Know if there is a waiting period before an insurance policy will be paid out and if there are extra fees to be paid at time of payout
Prepaying for a funeral is a big decision, one that should not be taken lightly. At Russon Brothers Mortuary, we understand the different facets behind the choice, and we are here to help you make the right decision for you and your family. With further questions or to preplan your funeral, give us a call today.
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