Funerals are expensive and can take a lot of effort to plan, especially when dealing with the grief that accompanies a loss. Pre-paying for your funeral is one way to ease the burden on your family and loved ones following your death and make sure your wishes are carried out. In addition to making things easier for your family during a difficult time, pre-paid funeral plans, if established correctly, are also excludable for Medicaid spend down purposes. This means that if you have to qualify for Medicaid, having a pre-paid funeral plan will not affect your eligibility.
Despite the benefits, pre-paid funeral plans come with risks, especially this year where funeral homes have faced unprecedented financial losses due to mandates and restrictions associated with the ongoing COVID-10 global pandemic, so if you are considering purchasing a pre-paid funeral plan, you need to exercise care.
Even under normal circumstances, consumers lose money every year when funeral homes go out of business before the need for the funeral arises. If the funeral home mismanages your funds, there may be no way to recover them. In addition, customers are not always entitled to refunds if they change their minds, and some funeral homes sell policies that require additional payments or that cannot be transferred if the customer moves.
If you decide to purchase a pre-paid funeral plan, the following are things to consider:
- Shop around. Prices among funeral homes can vary greatly, so it is a good idea to check with a few different ones before settling on the one you want. The Federal Trade Commission's Funeral Rule requires all funeral homes to supply customers with a general price list that details prices for all possible goods or services. The rule also stipulates what kinds of misrepresentations are prohibited and explains what items consumers cannot be required to purchase, among other things.
- Make sure you have a reputable funeral home. There have been cases of unscrupulous funeral providers taking advantage of customers, so make sure you choose a funeral home with a solid reputation.
- Read the contract carefully. Before signing, it is important to know what you are agreeing to. Can you cancel the plan and get a refund? Is the plan transferrable if you move to another area? Are you paying just for merchandise or for funeral services as well? If prices for funeral merchandise and services rise, will your estate be responsible for paying additional costs?
- Find out where your money goes. The pre-paid plan should provide information on what the funeral home will do with the money you pay them. Some states have protections in place to make sure the money is safeguarded, but other states offer no protections. Is the money put into a trust account? What happens to the interest income? Is there a plan if the funeral home goes out of business? What happens to any money left over?
- Make sure the plan won't affect Medicaid benefits. If you are buying the policy as part of Medicaid planning, you must purchase an irrevocable plan, which means you can't cancel or change it once it is bought.
Once you've purchased a plan, be sure to tell your family about the plan you've made and let them know where the documents are filed. If your family isn't aware that you've obtained a plan, then the plan is useless.
If you need assistance working through whether a pre-paid funeral makes sense for you, or if you have a completed Virginia preneed contract that you would like to review, please give my office a call. In Virginia, you have a right to review your contract with a legal advisor before you sign it or pay any money. I would be happy to speak with you about the best way to ensure your wishes are followed.
