Planning a funeral in advance can greatly alleviate the emotional burden on family members. Many individuals, like a reader known as Aging Annie, are considering prepaid funeral plans to ensure their wishes are honored and to relieve their children of that difficult decision-making process during a time of grief. However, the question remains: is prepaying for a funeral a wise decision?
Funeral Consumer Alliance, a national nonprofit organization dedicated to protecting funeral consumers, highlights that while planning ahead is advantageous, prepaying is not always necessary. In fact, they advise that prepayment should only be considered in specific circumstances, such as when individuals need to reduce their financial assets to qualify for Medicaid.
Understanding Preneed Arrangements
Many funeral homes now provide what are termed “preneed plans.” These plans allow individuals to choose their desired funeral services and pay for them either as a lump sum or through installments. Typically, the funds are placed in a trust fund that is accessible upon the individual’s death or an insurance policy is purchased with the funeral home as the beneficiary.
If you choose this route, it is crucial to ensure that the services specified in your contract are guaranteed at the agreed-upon price. Some contracts may include clauses that require additional payments if funeral home prices increase between the time of signing and the time of service.
Before entering into a preneed contract, consider asking several important questions:
– Can you cancel the contract and receive a full refund if you change your mind?
– Will your funds accumulate interest, and if so, what is the rate?
– Is there a waiting period before any associated insurance policy takes effect?
– Are prices locked in, or will additional payments be necessary at the time of death?
– What protections are in place in the event that the funeral home goes out of business or is acquired by another company?
– If you relocate, can the plan be transferred to another funeral home?
– If there are funds remaining after your funeral, will these go to your heirs or will the funeral home retain them?
It is essential to document all terms of the agreement in writing and inform your family about your plans. If they are unaware of your prearrangements, your wishes may not be carried out, and they could inadvertently pay for the same services twice.
Alternative Payment Strategies
While prepaying for a funeral might seem convenient, alternative financial strategies may be more beneficial. For instance, many life insurance policies provide a lump sum payment upon the policyholder’s death, which can be allocated for funeral expenses. This payment is typically disbursed quickly and avoids the probate process.
Another option is to set up a payable-on-death (POD) account at a bank or credit union. This type of account allows you to name a beneficiary who will receive the funds directly upon your death, bypassing probate delays. The account holder maintains control over the funds during their lifetime, enabling access in case of emergencies.
In conclusion, while planning your funeral in advance can provide peace of mind, careful consideration is necessary regarding whether to prepay. It is essential to weigh the benefits and potential risks and to explore alternative funding options that may better suit your individual circumstances.
For further inquiries or to share your thoughts, you can reach out to [email protected] or write to Savvy Senior, P.O. Box 5443, Norman, OK 73070.
