Prepaying your funeral…sounds like it may not be such a bad idea, right? After all, it’s probably a good thing to go ahead and make all the arrangements and, best of all, make sure everything is paid for in advance. That way, your family doesn’t have to worry about it.
While pre-planning your funeral is a great idea, and, aside from having a solid estate plan, might be one of the kindest gifts you leave for your family; prepaying your funeral may not be the best idea.
The reason is pretty simple: despite what you may have heard, prepaying your funeral is likely to cost you more in the long run, plus, there are better ways to accomplish your goals.
Generally, prepaid funerals come in two types: guaranteed and non-guaranteed. With a guaranteed plan, the products and services you purchase are paid for at today’s prices, no matter when your funeral is actually held. Non-guaranteed plans do not offer this guarantee, but they do allow you to pay for your funeral ahead of time, and, if your account goes up in value, your heirs can keep the excess.
So, how do prepaid funerals end up costing more? First, any changes to the items you select often end up cancelling any price guarantee. Second, because prepaid funeral plans are generally funded either through the establishment of a trust or through the purchase of a whole-life insurance policy, there are often substantial fees involved if you want to get out of the plan. This is not to mention that the funeral home you have a contract with may not be in business when the time comes for your funeral.
The good news is that you can plan your funeral and arrange for payment without entering into a prepaid contract. You can establish a joint bank account, a payable on death account, or even a funeral trust so that your loved ones will have money specifically designated to cover your funeral expenses.
For more information on establishing a fund for your funeral, you can contact an estate planning attorney.