Having selected your funeral director and completed your prearrangements to the degree that you want, there is one more consideration: How are you going to pay for them?
- The funeral industry is strictly regulated both at the state and federal level. The Federal Trade Commission requires a funeral director to give you his or her current price lists, which will reflect the cost of each item or service offered. As one makes selections, they are recorded on a “Statement of Goods and Services”. This statement is divided into three sections: Service, Merchandise, and Cash Disbursements.
- It will also have an explanation on embalming requirements, as it may not be necessary if your preference is direct cremation or immediate burial.
Prepayment is not a requirement of prearrangement. It is quite acceptable to make your selections or preferences known to your funeral director without paying in advance. However, there are very sound reasons as to why you may want to prepay for your funeral arrangements.
- By prepaying for your funeral arrangements, you further reduce the stress placed on loved ones by eliminating the financial burden at the time of your death.
- In funding your prearrangement, you insure that the money is available to carry out your choices at the time of need. If nursing home care should become necessary, it could deplete much or all of your assets.
- Another advantage to prepayment is that you may secure a “Guaranteed Agreement” which would lock in the cost of part or your entire funeral at today’s prices.
PRENEED AGREEMENT GUARANTEES
The funeral associated with a Preneed Agreement may be required in ten days, ten months, or even ten years. Hopefully the interest earned on the trust or insurance funding will equal or exceed any rise in costs for the funeral services or merchandise.
- If the Preneed Agreement is guaranteed, the interest helps the funeral director to offset any impact that inflation may have on his or her costs. Under a “Guaranteed Agreement”, the funeral director may not seek additional payment when the actual cost of the guaranteed services and merchandise exceed the funds in the trust account for such services and merchandise. Should the funds exceed the costs, the excess belongs to the funeral director.
- If the Preneed Agreement is not guaranteed, the interest enhances the ability of the fund to accommodate the funeral. The purchaser would be liable for any additional expenses when the actual cost of the funeral services and merchandise exceed the funds in the trust account. Any excess funds after the provisions for the funeral will be refunded to the purchaser (if different than the beneficiary) or the beneficiary’s estate.
OTHER PREPAYMENT OPTIONS
As it is acceptable to prearrange without payment, it is also acceptable to prepay without prearrangement. Many people place funds with their funeral director to pay for their eventual funeral without making any specific selections. In many cases, this is done to shelter assets from attachment by state agencies or to reduce ones assets to qualify for Medicaid or SSI.