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Sunday, August 20, 2023

Pre-Paying for (or just Planning) Burial and Cremation

You want to make it easy for your family when you die. But is it wise to pre-pay for a funeral or cremation?

We’re all going to die, and many of us prefer to have everything in order before we go, including a service and arrangements for burial or cremation. Paying for it all may seem like a no-brainer. But there is actually quite a lot to consider before handing over your credit card or check.

To Plan, to Pay or Both?

The Funeral Consumers Alliance is a strong advocate for planning your service without paying for it unless you must do so to qualify for Medicaid. They warn that many states still lack laws to protect funds in pre-paid plans, putting the money at risk. 

How to Obtain an Economical Burial or Cremation

The average funeral runs between $7,000 and $10,000 these days. For many people, that is more than they are willing to spend. But how can you cut costs? We consulted the Cremation Institute for their best ideas.

First, they suggest that you shop around when using a funeral home. They are not all the same, nor do they charge the same prices for the same services. You can also get a feel for the individual homes to determine which one might be a good fit. Establish a budget before you go and negotiate costs. Some homes are willing to work with you on price, and having a predetermined budget will keep you from getting “upsells”, such as buying the mahogany coffin instead of the perfectly fine pine one. 

You can also elect to skip embalming, which is not only bad for the environment but drives up funeral costs. Burying or cremating right after death eliminates the need to embalm. You might consider direct cremation, when your body is cremated upon death and returned as ashes. They can be scattered or kept in an urn, which you can shop for online. 

Caskets can be very pricey. Save money by renting a casket for a viewing or funeral, or by using a simple, eco-friendly casket. Finally, you can also consider direct burial and hold a memorial service at home.

Veterans’ Benefits

Veterans are entitled to many benefits on death, including a plot in a national cemetery  without charge for a gravesite or marker if they meet certain requirements. Someone will still need to foot the bill for embalming, burial and transporting the body. But even if they choose to be buried elsewhere, the Department of Veterans Affairs (VA) will provide death benefits, including:
  • Up to $2,000 in burial costs for a service-related death.
  • Up to $807 for a plot and $300 in burial expenses if the death was not service-related.
  • Up to $807 in burial costs and $807 for a plot if the death was not service-related but the death happened while the veteran was in a VA hospital.
Be sure to check the VA website for details on benefits. You can also check if you are eligible for military funeral honors.

Ask These Questions Before You Buy

If you are still considering pre-paying funeral costs after reading this article, make sure to get answers to each of these questions first:
  1. Do the payments seem reasonable?
  2. How long will I be making payments?
  3. What if I die before I have paid in full?
  4. What exactly does the plan cover?
  5. What will happen if I move?
  6. What will happen if the cost of my funeral goes up before I die?
  7. Who gets the interest earned on my payments?
  8. If I change my mind, can I cancel and get a full refund?
  9. If there is money left over, who will get it?
However, go ahead and prearrange by comparing prices from different funeral homes – there are often wide variations in cost for what are essentially the same services. Visit several to see which one you like the best. Some will let you fill out a form, specifying what you’d like at your service without paying a dime in advance. 

Economical cremations can be pre-arranged as well, although loved ones can also make a phone call upon death to contract the service. These range in cost from about $500 to $1,200 for what seems to be the same service. 

Then tell your family what you have chosen. Give them a copy of your plan or contract. Do not put your plan in a file or lockbox. Do not just say, “Everything is taken care of”. People can forget what you have told them, forget where to look for important papers, and even forget if you wanted burial or cremation, especially in the emotionally-charged time surrounding your death. 

Make sure your plans are carried out by providing written instructions to your siblings, children, a member of the clergy, your financial planner … whoever may need to help guide the process after your death. If having a religious ceremony is important to you, make that clear. 

Prepayment Pros and Cons

Why might you want to prepay? Sometimes, the funeral home will give you a discount. You can avoid inflation (although your money is tied up). You may be able to pay in installments, avoiding a large lump sum. Prepaying can give you peace of mind and ensure that you are in control of your exit. 

However, you should first consider why prepayment may be a bad idea. If the service provider loses your agreement, your plans will go awry. You can be overcharged if you don’t compare prices. Your chosen provider may be out of business, overbooked, or refuse to honor your agreement for any number of reasons, leaving no recourse for family members. The provider’s services could change over time, making them unable to fulfill your wishes. Or you may forget to adequately inform family members of your agreement, leading them to make different arrangements that they pay for. 

How to Prepay

You may think that by setting money for your funeral aside in your will, you have avoided many potential pitfalls. Since wills must go through probate, your body likely will have already been dealt with long before a will goes into effect. There are other ways to prepay that may be better.

A payable on death (POD) bank account, sometimes called a Totten trust, is an account held solely by you until your death, when the named beneficiary presents a death certificate to the bank and immediately gains access to the funds without waiting for probate. It works well if your beneficiary does not predecease you, and if that person can be trusted to spend the money as you wish, not on a one-way ticket to Hawaii. 

A regular savings account will also work if you set it up as a joint account with a trusted individual. When you die, this person will automatically own the account and can use the money to pay for your funeral. Again, this person must have your complete trust. As an account co-owner, he or she could withdraw funds at any time and use them for anything.

Three kinds of insurance may be used to cover funeral expenses. A life insurance policy may pay a lump sum upon death. Burial insurance can pay death-related costs, and pre-need insurance will cover a set amount for a funeral. It’s important to note that the Funeral Consumers Alliance, a watchdog group, does not recommend burial or pre-need insurances. 

Planning your funeral is a smart move, as long as you let several people know what your plans are in writing. But the benefits of paying in advance is a much more nuanced topic, and one you would do well to explore thoroughly. You want to make sure that the money is available as soon as you die to a trustworthy individual who will follow your plans to the letter. That done, you can check it off your list and concentrate on getting the most out of life.