Why You May Not Want to Pre-Pay for Your Funeral

Insurance companies and funeral homes often tout the benefits of the pre-paid funeral plans they sell. The idea is that you will save your family money and anguish when the time comes. The nation’s largest funeral providers made $226 million in pre-need sales last year, Forbes reports.

But the truth is, it usually is not wise to pay ahead, as the Funeral Consumers Association explains. Why? Survivors may not understand the contracts, be aware they exist or be surprised when they face additional fees. Additionally, many states don’t have adequate protections for the consumer, putting the money at risk, the group explains.

Planning ahead doesn’t require pre-payment
How are “pre-need” and “pre-payment plans” different than advance cremation planning? The difference comes down to money. Though many funeral homes may encourage you to pay ahead, most consumer groups encourage you to plan ahead but not pay ahead. It costs nothing to make basic choices like which provider you’ll use or whether you’d like cremation or burial. You can also get a headstart on paperwork. At Solace, we make advance cremation planning easy. You can complete digital forms at your convenience which we’ll securely store for you until needed. We can answer any questions you may have with 24/7 support.

Alternatives for saving for funeral costs
Many American families would struggle to cover a $400 expense, so planning ahead and saving is crucial to avoid burdening your family. While some families are turning to crowdfunding funerals, there are easier ways to avoid that route.

As this Motley Fool article explains, putting money aside in a savings account or a CD makes more financial sense. You can work with your bank to set up an account that’s “payable on death” (POD) or “transfer on death,” also known as a Totten Trust. A Totten Trust let’s you name a beneficiary to receive the money without probate when you pass.

AARP explains that with a bank account, you’ll earn interest and have money in an emergency, as well as providing money to your family when you pass away. Whether you choose to pre-pay or not, The New York Times offers the reminder to share your plan with others.
You should also make sure that your beneficiaries are up-to-date on your insurance and investment accounts.

According to the AARP, there are other smart ways to cover the costs.
Additionally, veterans may be eligible for assistance. There may be rare instances where you want to pre-pay to shelter money if you are applying for Medicaid, but experts say only do it if you have to. In Washington State, you can set aside a funeral fund of $1,500 and be exempt under Medicaid.

Questions to consider as you plan
As you make your end-of-life decisions, consider these questions:

  • What is the size of the expense for which you are planning?
  • How much time in advance are you planning?
  • What flexibility do you require regarding geography, timing?
  • What is the financial security of your family members and/or beneficiaries?

Know your rights
No matter how you choose to plan to pay for your arrangements, make sure you know your rights.

The Federal Trade Commission (FTC) has questions to consider if you pursue a prepaid funeral plan, for example: what happens to the money you’ve prepaid and the interest income on that money, and what happens if you move or cancel or the firm goes out of business?

The Oregon Division of Financial Regulation offers information and assistance on prepaid plans. Washington state offers some information and additional resources on their “Dealing with Death” page on the Attorney General’s website. Making an informed decision is a gift you can leave your family that will live on long after you are gone.

Photo by Pepi Stojanovski

Solace Cremation offers online arrangements for direct cremation services with one flat price and 24/7 customer service. Solace proudly serves Portland and Southern California. Learn more.

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