Prepaid funerals

If you plan and prepay for your funeral, let loved ones know where to find detailed information. Otherwise, family members may make new arrangements.​

Normally there are three ways to pay for a funeral ahead of time.

1. A funeral trust account set up with a funeral home or bank
2. A life insurance policy
3. Money that a loved one can access to pay for a funeral

Once you have a plan, you will receive a contract addressing matters such as:

• Total cost
• Payment plan and method of payment (trust or insurance)
• Itemized listing of the funeral or burial service and merchandise provided (casket, headstone, etc.)
• Guaranteed and nonguaranteed services and items
• Cancellation terms

The contract should tell you how and where you will receive funeral services. Make sure the services you want are listed.

With a revocable prepaid contract funded with a trust, you can withdraw the principal and accrued interest at any time. However, if you establish an irrevocable agreement, you cannot withdraw any principal or interest, or cancel the contract. If you apply for Medicaid or other public assistance, an irrevocable trust would not count toward your assets.​

If you are healthy enough to buy regular life insurance, the policy could take care of your funeral costs. Some people who are unable to qualify for a life insurance policy, however, buy a "small-face" or "pre-need" type of life insurance to cover funeral costs.

Here are some factors to consider with these funeral policies:

• They may not pay if you die within a couple years of buying the policy.
• It is a good idea to calculate how much you will pay in premiums compared to what the policy will pay out. Are you better off saving on your own?
• If the price of the funeral you want increases, will your policy cover only a flat amount?
• Life insurance should be purchased through a licensed insurance agent.

If your funeral plan provider tells you to switch from a traditional funeral trust plan to life insurance, ask:

• Why is this change being proposed?
• Can I change the policy beneficiary if I move or want to change funeral providers?
• Will I get full value if I cancel the policy early?
• How much will the funeral provider receive for moving my funds from a trust account to an insurance policy?
• How much commission will the insurance agent receive for the sale?
• What are the tax implications?

Although there are many honest and reputable people and companies that offer preneed funeral planning, there are unscrupulous con artists who sell overpriced plans or just take your money. Ask to see a valid business license.

The Division of Financial Regulation licenses people who sell contracts to prepay your funeral. The division also licenses insurance agents. Its consumer advocates can answer questions you might have about whether an agent is licensed or how a funeral (life insurance) policy might work.​

The Funeral Rule, enforced by the Federal Trade Commission, ensures that you:

• Buy only the funeral arrangements you want. You have the right to buy separate goods (such as caskets) and services (such as embalming or a memorial service). You do not have to accept a package that may include items you do not want. While federal and state law do not require the use of an outer burial container (to surround the casket or urn), many cemeteries require them.
• Get price information on the telephone. Funeral directors must give you price information on the telephone if you ask for it. You do not have to first give them your name, address, or telephone number. Although they are not required to do so, many funeral homes mail their price lists, and some post them online.