The Truth About Pre-Planned Funerals

Barton Family Funeral Service recommends pre-planning your funeral service and evaluating your options before deciding to pre-fund your services.

The best way to pre-fund your insurance needs is with an insurance product written by a good insurance company. That way your funds are safe and always under your control.  In addition, Washington State has stringent laws about the safety and financial health of insurance companies. If a company is allowed to sell insurance in Washington, you can be assured that your money is safe.

We are not a fan of paying for funeral services in advance into a funeral provider’s trust account.  So-called guaranteed prices are sometimes not totally honored.  A common excuse is, “Oh, they don’t make that casket anymore.”   The nice people at a funeral home that sold the pre-need plan might not be there anymore when you need them. Or the funeral home isn’t there anymore.  There is too much uncertainty.

The safest way is to simply fund it through insurance which is portable and goes with you where ever you may go. Talk to you tax advisor or accountant about tax advantages of sheltering funds in a properly structured insurance policy.

Definitions

Pre-arranged funeral contracts are called “Pre-need” contracts to distinguish them from “At-Need” arrangements. Funeral contracts that are written between the consumer and funeral establishment at the time of a death are At-Need Contracts. We feel that the At-Need Contract drawn up after a death has occurred is when a family is least prepared to make all of the many decisions involved; therefore, the concept of making these important decisions early and in a more informed manner makes sense. This area of planning is call Pre-Planning.

Why is there criticism of Pre-need plans?

The short answer is that in a small number of cases, a funeral establishment has breached the contract or fraudulently absconded with the trust funds that were paid to fund the funeral. Lawsuits to settle these cases receive a disproportionate amount of attention.
The longer answer involves the interaction between the funeral provider and the family of the deceased person when they go over the arrangements that have been made. If a family wants to materially change the plans that have been made previously, they are in effect negotiating a new contract. Unfortunately some funeral establishments use the family’s desire to change something as an opportunity to significantly raise prices.

A final expense pre-need funeral contract simply states that a funeral establishment will provide the goods and services stated in the contract at the current prices. To ensure that there are funds available when needed, the pre-need contract will provide that money be held either in a trust account or in an insurance policy.

Important Note

A pre-planned funeral arrangement does NOT have to be pre-paid.
Barton Family Funeral Service routinely writes pre-arrangements and will keep them on file as a service for our families. These pre-arrangements will later be paid when the services are needed. This method is a convenient way for our client families to record the necessary information before the death occurs and be better prepared for the event of the death.
However, we also sell Forethought Life Insurance to pay for a funeral that may be several years or even many years in the future. The terms of the agreement are tailored to each individual’s needs and preferences. Single payment options as well a monthly payment options are available.

Click here for Articles about the Risks of Pre-paying for Funeral Expenses

Federal Trade Commission Suggestions

The Federal Trade Commission suggests some questions to ask in their publication, Funerals, A Consumer Guide:

• What are you are paying for? Are you buying only merchandise, like a casket and vault, or are you purchasing funeral services as well?
• What happens to the money you’ve pre-paid? States have different requirements for handling funds paid for prearranged funeral services.
• What happens to the interest income on money that is pre-paid 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.

Funeral Consumers Alliance

At least one-third of the complaints received in the national office of Funeral Consumers Alliance has to do with pre-paid funerals. Some of the most common complaints are:

• “The funeral director told me the casket Dad picked out was no longer available and we’d have to buy another (more expensive one)”
• “I’ve had to move in with my children in another state, and the funeral home says my pre-paid money can’t be transferred to another funeral home”
• “My mom changed her mind and now wants to be cremated, but the funeral director said the plan can’t be changed”

Plan Ahead

In spite of the obvious pitfalls involved in some pre-planned funeral contracts, planning ahead is still the best strategy to avoid having to make funeral arrangements under stressful conditions when a death has just occurred.

Gather Necessary Information

The first step in planning a funeral is simply writing down all the information that will be needed on the death certificate. Keep the information in an accessible location known to family members. Do not keep it in a safe or bank safe deposit box where it is difficult to access when needed.

Let Your Wishes Be Known

Write down your wishes and talk to your family about it. If you trust the funeral director more than you trust your family, you may have a good reason to prepay for a specific funeral arrangement at a specific funeral home.

Washington State Law allows residents to pre-authorize their own Cremation; therefore, the next-of-kin is not required to authorize the cremation, nor allowed to change the decision of cremation at the time of death. To be effective, such a written authorization must conform to simple requirements of the law. Click HERE to see an example of a Cremation Authorization.

New:  As of May 1, 2020 Washington State allows Hydromation as an alternative to Cremation.  You can read about Hydromation HERE.  You can also authorize your own Hydromation.

Consult a lawyer to make sure your Will is properly drawn so that all your wishes will be carried out. This may also involve forming a trust to solve potential probate, tax, or inheritance matters. When you trust your family, they will be the ones who take care of your affairs after you are gone. It is immensely helpful to them if you write down what you want them to do and then they will decide how to do it based on the conditions they face.

Prepayment Has Both Advantages and Risks

We believe that life insurance is the safest and most economical way to fund your funeral arrangement. Funds placed with funeral homes in their trust accounts are subject to confusing regulations and in some states the regulations are totally inadequate to protect your rights. Forethought Life Insurance is portable and will travel with you and can be assigned to any funeral establishment anywhere. If you move, your family can use the cash value of the policy to pay for part or all of a funeral in the new location. Insurance does not guarantee or fix the price of a funeral but it does provide access to funds in a time of need.

Most states have a long and excellent history of regulating life insurance companies so you can be assured that the money will be there when needed.

Disadvantages

The major disadvantage of life insurance purchased at an advanced age is the cost. It really amounts to little more than pre-payment because the premium is close to the cash value of the policy.  Other than that, there may be good estate planning features to consider. We frequently work with attorneys who are experts about estate planning and are happy to make a referral if you need help.

Our Prepaid Funeral Planning

Barton Family Funeral Service offers a pre-payment option through Forethought Life Insurance. The insurance just makes sure funds are available when you need them. It doesn’t lock you into any specific funeral arrangements and does not guarantee future prices.

Unique Benefits

Accidental Death Benefit

• Liberal Age Limits
• Multiple payment plans may be written from birth to age 85; single-payment plans are available to age 99.
• Tax and Attachment Protection
• All plans are designed to avoid taxes by the IRS or attachment when financial care is assumed by Medicaid.
• Rapid Payment on Claims
• The majority of death claims are paid within 24 hours upon receipt of claim forms. Electronic bank deposit is also available to avoid mail delays.

Washington State has a stringent set of guidelines to assure consumers that pre-need contracts are fair. This means that a contract spells out what your rights are and provides for full disclosure of estimated costs at the time the policy is written.

For many year prices were relatively stable and most families found that the funds set aside were sufficient.

Sadly that has changed as the United States is experiencing rapid inflation.   Much of that is due to monetary policy but another unseen cause of consumer price inflation is the unintended consequence of regulations.  We continue to seek ways to keep our fees as low as possible but are often frustrated by circumstances beyond our meager ability to control.