Planning and paying for a funeral

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Laying a loved one to rest is not only one of the most emotionally draining experiences one can have, it may also be one of the most costly. According to the National Funeral Directors Association, the cost of a regular adult funeral that includes the most basic of services is estimated at about $6,500.Footnote 1 This includes the purchase of a relatively inexpensive metal casket (caskets can easily be the most expensive items in a traditional funeral service, ranging from $2,000 on the low end to upwards of $10,000), but excludes cemetery costs, monument/marker costs, and other miscellaneous charges for items such as flowers and an obituary). Clearly, costs can vary widely depending on the products and services selected and the provider you choose.
Unless you already have a relationship with a funeral home that you are satisfied with, it is best to do your research and obtain quotes from at least three different providers before making a selection. This can be done in person (or over the phone) usually within a matter of hours. The Federal Trade Commission (FTC) includes a funeral pricing checklist on its website. Make copies of the list and use it when you comparison shop for funeral services.

The funeral rule: The consumer's friend

The Funeral Rule, established by the Federal Trade Commission 30 years ago, makes it possible for you to choose only those goods and services you want or need and to pay only for those you select, whether you are making arrangements when a death occurs or in advance. The Rule allows you to compare prices among funeral homes and to select the funeral arrangements you want at the home you use.
Specifically, the Funeral Rule protects consumers in the following ways:
  • The funeral home must give you a General Price List (GPL) that is yours to keep. It lists all the items and services the home offers and the cost of each one.
  • You have the right to buy separate goods (such as a casket) 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.
  • The funeral home is required to provide you with a written statement after you decide what you want, and before you pay. It should show exactly what you are buying and the cost of each item. Where appropriate, the statement should include descriptions of any legally required cemetery or crematory products or services and their associated costs.
To learn more about the Funeral Rule, visit the Federal Trade Commission's website.

Payment plans and other funding options

Considering the sizeable cost and the many decisions associated with planning a funeral, a growing number of individuals are opting to plan and pay for their own funerals in advance. In fact, many elder law attorneys advise prepayment as a way to invest in assets that will not be countable by Medicaid or SSI.Footnote 2
However, when prepaying, care must be taken to ensure that your funds are not mismanaged, that the business does not fold, or worse — that your money is embezzled by unscrupulous funeral providers. At a minimum, the FTC recommends asking the following questions before signing up for a prepaid funeral arrangement:
  • What happens to the money you've prepaid? States have different requirements for handling funds paid for prearranged funeral services.
  • What happens to the interest income on money that is prepaid and put into a trust account?
  • Are you protected if the firm you dealt with goes out of business?
  • Can you cancel the contract and get a full refund if you change your mind?
  • What happens if you move to a different area or die while away from home? Some prepaid funeral plans can be transferred, but often at an added cost.
If prepaying does not appeal to you, there are other ways to ensure the money is available to cover the cost of your funeral after you are gone. One such option may be to set up a "payable-on-death" account (POD) with your bank. In this case, you would name the person who is responsible for handling your funeral arrangements as beneficiary. If properly executed, the monies would be available immediately upon your death without having to first pass through probate.
Another option may be to use proceeds from life insurance policies to help pay for all or part of the funeral costs. In some cases insurance proceeds may be allocated as payable directly to the funeral provider; in others, insurance benefits may be "assigned" to the provider, in which case the policy's beneficiary authorizes the insurance company to issue the proceeds directly to the provider.
These are just two possible options for using life insurance proceeds to pay for funeral costs. Contact your life insurance carrier to determine what other options might be available.
Whatever arrangements you make, be sure to discuss them first with your attorney, estate planner, or other trusted financial professional.

Footnote 1 Source: National Funeral Directors Association General Price List Survey, 2015.

Footnote 2 Source: ElderLawAnswers.com, "Pre-Paid Funeral Plans: Buyer Beware."

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