The discussion of dying is sure to bring up a lot of emotions, beliefs, and thoughts. No one wants to think about planning their own funeral, but it could be the best thing to do for your family.
When a loved one dies, we not only experience grief but also the stress of getting our loved one’s finances in order. We are charged with canceling credit cards, consulting their will, and figuring out how to access various accounts.
This can be an extremely overwhelming experience for someone who is already in a state of grief. Pre-planning or investing in a pre-paid funeral can reduce your loved one’s responsibilities so that they can focus on taking care of themselves during this difficult time.
Expert opinions vary about pre-paid funerals, but what most agree on is that pre-planning your funeral is the loving thing to do for your family. Pre-planning allows them to feel like they are respecting you and your wishes without making all the decisions.
Read on to discover how to pre-pay and pre-plan for your funeral. We will also cover the pros and cons of pre-paid funerals, so you can make the best decision for you and your family.
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Pre-Paid Funeral Plans: How to Purchase
Planning your funeral in advance reduces the number of decisions your loved ones will need to make after you pass. It also allows them to feel like they are honoring you and your life. Explore the following pros and cons of pre-paid funerals and how to invest in a pre-paid funeral.
Costs Involved in Pre-Paid Funerals
Before you look further into pre-paying for your funeral, it’s helpful to understand the break down of costs. Funerals can cost up to $11,000 or more, so it’s important to understand what you’re paying for and if you want all the services a funeral home offers.
One of the largest charges is the funeral’s service fee which costs around $2,000. Other charges to expect are transferring remains which costs $310, embalming $695, and cosmetic services for $250.
If the funeral takes place at the funeral home expect to pay around $420 for the viewing and $495 for the ceremony. To then transport your body after the ceremony to the cemetery will be $318.
The most expensive costs to expect are the casket, the cemetery plot, and the headstone. A metal casket can cost around $2,395, a cemetery plot $2,000 to $4,000, and a headstone from $1,000 to $3,000.
Cremation along with funeral services can cost an average of $6,000 to $7,000. Other expenses like flowers and a newspaper obituary will also be additional costs.
How to Pre-Pay for Your Funeral
Pre-paid funeral plans can be purchased directly from a funeral provider. To purchase a pre-paid funeral, you’ll need to contact a funeral home and speak with a funeral director. The funeral director will be able to explain their process and guidelines for pre-payment.
Many funeral homes allow you to pay in installments or even make a lump sum payment to cover the full cost of the funeral upfront.
It is also not uncommon for some funeral homes to offer life insurance coverage or pre-need insurance policy plans to cover the funeral costs. This we will discuss a little further into the article.
You can also set up a bank account or trust with the funeral home, making them the beneficiary to pay for the costs in advance. Choosing this option allows you to remain in control of the funds until you pass.
Pros and Cons of Pre-Paid Funeral Planning
Experts agree that there are a variety of pros and cons to pre-paying for your funeral. Use the following list of pros and cons to decide if a pre-paid funeral is right for you and your family.
Here are the pros to consider when deciding whether a pre-arranged funeral plan is right for you or not.
1. No Second Guessing
When you pre-pay for your funeral, there’s no second guessing. Your family and loved ones won’t have to decide how to pay for the funeral or how to conduct the funeral. This will relieve a lot of stress and potential conflict after you pass on.
If you do decide to pre-pay for your funeral, make sure to let your family know. While it can be uncomfortable to have this discussion with your family, it will help to reduce any misunderstandings later on.
You can also ask a loved one such as a spouse or adult children to help you plan for the funeral together. That way they’ll be prepared for all the arrangements and know exactly what was paid for and what to expect.
They can also help to advocate for your family after you pass when speaking to the funeral home to make sure they follow through on all the arrangements purchased.
You can also leave a will for your family detailing your pre-paid funeral arrangements and plan. Make sure to inform at least one of your family members about your will so they know where to access it after your death.
2. Saving Money
After you pass, your family’s number one goal will be to make sure your life is remembered and honored. In their time of grief, this can lead them to overspend on items to show how much they cared. While this is a beautiful sentiment and may be helping to their healing process, a lot of times it’s not necessary.
It may also put them in a financial bind or have them receive less money from your estate. Many folks who do pre-pay for their funerals end up spending less because they are looking at the costs objectively and not through a lens of grief. While this isn’t guaranteed, it seems to be a trend among people who do decide to pre-pay for their funerals.
3. Cemetery Plot
When many people think about their final resting place they want to still feel like they are surrounded by their family members who have passed before them. It gives people a sense of peace, love, and comfort knowing that they will be buried next to their mom, dad, or spouse. When you pre-pay for your cemetery plot, you have a guaranteed place next to your loved ones.
This is also helpful for surviving family members who want to visit their loved ones who passed on. They’ll be able to do this is one visit instead of going to multiple cemeteries.
4. Control Over Arrangements
When you pre-pay for your funeral expenses, you get to be in control of the funeral arrangements. This can help you to feel better about passing on and helping your family to remember you in a special way.
This can also give them peace of mind and a connection to you after you pass. Knowing that you planned the funeral will be a sweet reminder of your time on earth and how you lived your life.
With any life decision, there are also some cons to take into account before making your final decision. The following is a list of cons to consider when deciding if pre-paid funeral arrangements are right for you.
1. Financial Burden
Paying for your funeral in advance may place a financial burden on you. You may need the money for your funeral to go towards other bills and life needs. You may also prefer using the money to travel or enjoy your life instead.
Paying for your own funeral in advance with money you need to live on can be unnecessary if you have a life insurance policy. If you’ve invested in a life insurance policy then your beneficiary will receive death benefits that can be used to pay for your funeral.
If you pre-pay for your funeral you may be subject to paying more later on, as inflation rates rise. For example, the cost of the casket could change between the time you pre-paid and the time you pass. This could leave you or family with additional charges that were not planned for.
To bypass changes in inflation rates, speak with the funeral home to determine if the payments you’re making are for a fixed price. Avoid signing on the dotted line until you know for sure that you or your family won’t need to pay more later on.
3. Risk of Lost Funds
Even though funeral homes provide a much-needed service, at the end of the day they’re still a business. They compete with other funeral homes and must manage their finances properly to be successful.
When you pre-pay for your funeral, you’re putting your faith and your money into their business. That means your money is subject to their business’s longevity and to any financial issues they may experience. For example, if the funeral home goes bankrupt, then it’s not very likely that you’ll be able to get any of your money back.
If this were to happen you could attempt to hire an attorney and take legal action but again there is no guarantee you will get your money back and it could very well end up costing more in attorney and legal fees.
Many pre-paid funeral arrangements are non-refundable. This means that if you want to change your funeral arrangements later on or select a different funeral home, you won’t get your money back.
In many cases, pre-arranged funeral plans are non-portable meaning they cannot be transferred from city to city or state to state.
Keep this in mind, especially if there’s a chance that you may move out of state.
Best Alternatives to Pre-Paid Funeral Plans
Pre-paid funerals have their pros, as well as cons. If the cons are leaving you second-guessing whether or not to prepay your own funeral expenses, then we would like to offer you with a couple of different alternatives to have available, rather than working directly with the funeral home.
Burial Life Insurance
One of the best alternatives and a much safer way to prepay for a funeral is with the use of a life insurance policy.
Life insurance provides a tax-free death benefit in which the funds can be used to cover the entire cost of a funeral, as well as other expenses.
Just about any type of life insurance policy can be used to help pay for funeral expenses. A type of life insurance called final expense life insurance is the ideal choice when it comes to using life insurance for funeral planning.
Final expense life insurance is the most popular life insurance for seniors ages 50 to 85 especially when not a lot of life insurance is needed. This type of life insurance is what is known as whole life insurance or permanent life insurance.
The coverage not only provides a lifetime of protection but also has a guaranteed fixed premium, as well as guaranteed cash value growth. Coverage amounts can range anywhere from $1,000 up to a maximum benefit of typically $50,000 making it the perfect choice to cover expenses specifically for a funeral.
Best of all, final expense life insurance is affordable, does not require a medical exam and coverage can be made all within the same day of applying.
Several funeral homes will accept a life insurance policy as a form of pre-payment for a funeral. This works by collaterally assigning the life insurance death benefit to the funeral home. It is important to know that you are not assigning the funeral home as the beneficiary.
A collateral assignment is a documented agreement between the owner of the life insurance policy, the funeral home and the life insurance company that states the funeral home will receive the amount due to them to pay for the funeral costs. Any remaining portion of the policy death benefit will be paid out to the named beneficiary on the life insurance policy.
It is not uncommon for a funeral home to offer life insurance coverage or even be partnered with a licensed agent that can offer you a funeral life insurance policy. While this can be convenient to both the funeral home and potential client, it may not be in your best interest to purchase it through the funeral home.
We recommend working with an independent life insurance agency that specializes in funeral insurance. Independent life insurance agencies have no ties to the funeral home and have your best interest in mind. A life insurance agent who is not directly involved with the funeral home has the ability to shop your life insurance coverage with multiple companies.
This allows for the agent to provide the client with the best company, plan, and premium that meets your funeral planning needs. They can also assist in the collateral assignment process if needed.
Self-Funding Savings Account
A second alternative would be to set up your own personal savings account with the goal of self-funding your funeral costs.
Some banks offer a Totten Trust or Payable on Death (POD) account which acts just like a savings account, but with a beneficiary. With Totten Trusts you deposit funds into the savings account and it builds interest over time. If you pass away the named beneficiary will have access to the account value to pay for funeral costs.
This option allows for full control of your money but requires a significant amount of discipline in not accessing the money for other needs. A second concern is not being able to deposit enough funds in a timely manner to meet the full cost of the overall funeral expenses.
It’s also important not to name the funeral home as the beneficiary. You will want to name a family member or loved one who will be in charge of handling.
How to Shop for a Pre-Paid Funeral Plan
If the alternatives to a pre-need or pre-paid funeral planning are not an option and you feel more comfortable working with an actual funeral home, we have some helpful advice and questions to ask in your search.
- Search around and get comparison quotes from different funeral homes
- Check online for positive and negative reviews left for the funeral home
- Visit the funeral home’s website, if they have one, to get familiar with their business and services they offer
- Be sure to carefully read any contracts and look out for any fine print
- Seek the advice of a legal professional, such as an estate planning attorney
Questions to ask:
- Is there a payment plan or is the full payment required upfront?
- If payments are allowed is the price guaranteed or can cost rise in later years?
- Do they allow for collateral assignment or are they required to be named a beneficiary?
- What happens if you move?
- What is the refund policy?
- What happens if the funeral home sells and ownership changes?
- What happens to any unused money after the funeral?
Family Communication is Important
One of the largest pieces of advice that we can offer is to communicate your plans with your family and loved ones. Don’t wait to plan before it is too late. Having a well thought out plan can greatly eliminate stress, as well as any large financial burdens.
Outside of funeral planning be sure to have a will drawn up. This document in itself can provide detailed instructions as to what your wishes are and how they are to be carried out after you’re gone. The will is another document that should be discussed with your family and loved ones.
Pre-Paid Funeral Plans and What's Right for You
Only you and your family can decide if pre-paid funeral plans are the best decision. If you’re concerned about your funeral arrangements, pre-planning without paying can also be helpful. Pre-planning will allow you to find the peace of mind you need, knowing you helped your family to make decisions prior to grieving your death.
Want to know more about life insurance policies that can pay for your funeral arrangements? Check out our blog post to learn more about how life insurance works and how your family can receive death benefits to pay for your funeral.
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