Prepaid Funeral Planning: Don't Do It!

Prepaid funeral plans are the “extended service warranties” of the funeral industry—profitable for the funeral home but often useless. The Houston Chronicle has a sad story of a woman who pre-paid for her funeral so that her children wouldn’t have to deal with any financial matters—but after she died, the funeral home told the kids “their mother had not paid her bill in full. They would have to pay $5,170, about what Ferguson originally contracted for the arrangements.”

Some consumer groups and the retirees organization AARP recommend against prepaying. They say that funeral homes, particularly those that have changed hands, do not always honor prepaid contracts or the agreed-upon prices.

“We advise consumers to preplan, but not to prepay,” said AARP Texas spokesman Rafael Ayuso. “And this is largely because pre-need/prepaid contracts can leave many important questions unanswered and the industry is rife with deceptive sales practices and, in many cases, outright fraud.”

We suggest you set aside some of your savings to cover the cost, and arrange to make that money legally available to designated loved ones who you trust to carry out your wishes. Sure, not every funeral home is going to try to screw over a grieving family with tacked-on fees—but this is the one big event where you shouldn’t leave yourself or your loved ones unnecessarily open to fraud or fee gouging.

“Are prepaid funerals worth it?” [Houston Chronicle]
(Photo: Getty)

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  1. Balisong says:

    I don’t understand how this is possible… Did the lady not keep the paperwork from her transactions with the funeral home? And if you pre-pay for your funeral, is inflation taken into account at the time?

  2. chili_dog says:

    This is totally true. My wife’s grandmother pre-paid for the funeral in about 1983. By the time she did pass over, in 2005, the business had been sold to a national firm. They would not honor the contract simply because it was not in their purchase agreement. I spent about 10K in lawyers to push the issue and it came to nothing. They were not liable because the original funeral home owner, the founder did not keep accurate records, the prepayment was not part of the sale (he was a very honorable man and honored all agreements, verbal or otherwise) but his poor record keeping was the downfall.

  3. Xerloq says:

    @Balisong: In some cases the prepayment was done on handshake terms – no paperwork . There was a time when such a thing was common.

    In the case where a funeral home changes owners, the new owners might not be legally obligated to honor the contract. I saw the article in the AARP mag at a visit to a relative’s where the owner of a company said he’d never buy a funeral home if he was obligated to honor the contracts.

    It’s better to stick your planned expenses into a savings account held by a trust to be released on death.

  4. pegr says:

    But how does that jive with the problem of when an ailing elderly person has no money left and goes on Medicaid?

    Before a person’s funds are depleted, they may prepay for their funeral. If they don’t, they will likely pass with no funds, leaving the expense for their family.

  5. Jamie Beckland says:

    So what are we supposed to do now?? I have always thought of prepayment as a great option to allow grieving relatives a fighting chance to avoid being snowballed by a funeral director.

    Now you’re telling me that they will get snowballed anyway?

    How are we supposed to be assured of getting a fair deal with this industry?

  6. Gump says:

    Prepaid burial trust is a useful way of disposing of assets for long-term care planning purposes in my state.

  7. shrtcrt says:

    Plus if you keep the money in a bank account, you might earn a little interest on it. Why let the funeral home have it. What happens if you pre pay and they close shop? Or if you move out of the area. I think it is a joke and would never pre pay for it.

  8. darkened says:

    When you prepay your funeral you pay for a set of services at that date, when you die if it’s 5, 10 years down the road your money does not pay enough for those services leaving your family the bill. A very poor situation to have to deal with a deceased family member and then try to come up a few thousand dollars to cover their funeral which you thought was prepaid.

    What every person should own is noncancellable life insurance policy with accelerated pay out on death with the beneficiary being the person that will execute all the final arrangements. These are by far the best solution to everyone involved. And have them fully aware of how to get the policy and to contact the company to payout.

    I was previously a life insurance agent, these are absolutely the way to go. Don’t expect a regular life insurance policy to cover the funeral, they take months if not years before they will finally pay out, especially if they contest the death or the payout. Every adult that has dependents should have a life insurance policy in the range of $500,000ish during their time of having a mortgage/raising kids. Term life that has return of premiums (if you don’t die you get all your money back) is the best option overall.

    A simple calculation is 10 times your yearly salary for a face amount of a term life policy, if that figure is less than $250,000 or $500,000 at best it would be to go with either of those numbers if financially possible. Always buy insurance through an independent agent and never from an agent tied to a specific company since they can only sell you whats best for that company not whats best for you.

  9. forgottenpassword says:

    Isnt the SOB funeral owner who sold or made the orignal contract with the person liable even IF they knowingly sell the funeral home to someone else who stipulates that they dont have to honor contracts made under the past owner?

    This is DISGUSTING!!!!! If you dont provide services once paid for…. you are in breach of contract! Its just dirtyhanded & dispicable to attempt to weasel out of doing what you were paid to do!

    At the very least…. money should be refunded.

    I think the whole funeral home business is just a big scam anyway. Outrageously overpriced & scamming people into paying a lot by preying on their grief.

    I should open up a “bargain basement” , practical, ecomonical funeral home. I’d probably have so much business that I would have to turn people away. Of course… there are probably organizations & laws that keep the status quo when it comes to expensive funeral home services.

  10. MercuryPDX says:

    @forgottenpassword: I always thought that once a business changes hands, that it takes all the assets as well as the liabilites/resposbilities, so the previous owner would be off the hook?

    I’m all for bargain basement too. Just cremate me in a cardboard box, and put the ashes in a paint can to be scattered later.

  11. JimF says:

    One of the subsidiaries of the company I work for is a cemetery, and of course we urge people to pre-plan (aka – buy pre-need). There are obvious business reasons for this, but there are also a lot of benefits for the customer, such as locked-in pricing (you’re protected from inflation, future price increases, etc), the ability to spread payments out over time, knowing that next-of-kin won’t be burdened with an expense, etc. Not to mention, we discount for people who buy pre-need.

    There is a substantial difference between buying a cemetery plot pre-need and pre-paying for funeral services. When you buy a space in a cemetery, you get an actual deed for that space (be it in the ground or in a mausoleum) – this is a legal document that is irrefutable. Technically, you are the legal owner of that land (or part of the building). There’s no backsies…

    I would advise people that if they want to save their heirs from a financial burden, etc., that they buy their cemetery plot directly from the cemetery. This will minimize any financial burden when funeral arrangements are necessary because the burial plot is typically the largest part of the total cost of arrangements. You reduce the at-need expense, and you are also ensure that you don’t become a victim like the people in the story. It’s the best of both worlds.

  12. theblackdog says:

    This is why my grandmother put some money away in CD’s that are co-owned by my dad, the money will earn some interest and it will be there for her expenses when she dies.

  13. crypticgeek says:

    @JIMF

    I concur, this is probably the only death need you can prepay and be absolutely certain it will be there for your family when they need it. Unfortunately the funeral industry is full of people who prey upon families of the deceased. More and more independent funeral homes are being bought up by large corporations who will do anything to screw you over. It’s a sad state of affairs to be sure. Buy your plot and pre-plan your funeral to spare your loved ones the trouble of trying to make those decisions for you. Make your wishes known to them. Maybe even put some money away for the funeral if you can, THEBLACKDOG’s suggestion is a good one.

  14. “How are we supposed to be assured of getting a fair deal with this industry?”

    You ask around among people who deal with death regularly, like estate attorneys and cancer support groups and ministers. The problem with the funeral industry, and it’s the exact same problem as the wedding industry, is that they don’t HAVE to get your repeat business. You show up ONCE, it’s a major life event so you’re going to shell out, and they can screw you as hard as they want — you won’t be back.

    So ask people who DO deal with funeral places on a regular basis. There’s usually one or two places in town, typically locally-owned, that are reputable and not out to screw you.

    As for payment, pre-paying to a reputable home can be a fine strategy. But if you’re not sure it’s reputable, another good option is a savings or checking account specifically designated for funeral expenses — either a joint account or a payable-on-death (POD) account, depending on how much you trust your relative in question. The problem with life insurance can be that it can take too long to pay out to actually PAY for the funeral, but again — know how fast it’ll pay out, and you know best whether your surviving relatives can “float” the $6,000 or so until the insurance comes in, or whether that would be far too much of a hardship for them.

  15. Womblebug says:

    Prepaying with a reputable state cremation society is another way to handle this. You sign up and pay the fee, and they handle all the cremation arrangements. I’m not sure if they also handle the memorial service, but if not, I’m sure they can recommend someone reasonable to you. The service is also transferrable if you move out of state.

    Don’t think there’s anything similar for the traditional embalm and bury, though.

  16. pylon83 says:

    I have no use for a pre-planned funeral, mostly because I plan to live forever.

  17. topgun says:

    As the commercial calls it “final expenses” are such a waste. At one time I wanted a closed casket with a beer keg on top and a sign reading “The beer’s on me”. (literally) Then I found out it wasn’t allowed. Plan B: If your family feel they need a wake you can at most mortuaries “rent” a casket. I hate family gatherings so I don’t plan on showing up even for my own funeral. You can then of course be cremated in a cardboard box. Cheapest way to go. If my family insists on scattering ashes I prefer the sand trap on #11 at Whispering Pines. I’ve spent lots of time in there as it is and might as well spend eternity there.

  18. topgun says:

    I should also mention that funeral homes creep me out.
    In addition in my teenage years a long time ago, we had a local mortician (Harry the Fairy) that hung out at the mall trying to pick up teenage boys for “modeling”. Rumor had it that he also…well you know did stuff with the corpses. Probably urban legend.
    That’s all I got

  19. humphrmi says:

    “Look, just because we’re bereaved, that doesn’t make us saps!”

    Sorry, couldn’t resist.

  20. SkyeBlue says:

    I think my 86 year old Mother-inlaw who just passed away back in November handled it perfectly. She gave one of her her children $6000.00 she had put back specifically to pay for her funeral, clearly made her last wishes known and had her burial plot already paid for.

  21. sporks says:

    Aaaaactually.. if you go to a locally owned one and not a chain, you’re in -much- better luck when it comes to pre planning. My grandmother and mother have both pre planned at a family owned home that has been in the city since the beginning. With my grandmother, the only issue that arose was the opening/closing of her grave, which was more of a cemetery issue than a funeral home issue. I know that not everyone has this luxury (many “family owned” places are owned by SCI and other corporations) but if you can find a family owned one it’s going to be a lot less slimy.

    The issue I have with many homes is that even if you make it clear what you want and don’t pre plan, it’s common for them to guilt trip your grieving family into paying more for a funeral with a more expensive casket or headstone and the like. When my mother was pre planning her simple wishes when I was with her, we actually had an assistant funeral director (salesman, but with a more professional sounding name) basically tell us that her wishes to not have a funeral and instead for people to do something good for the community was selfish on her behalf, because I (and the rest of the family) would need that closure a funeral would provide. Strangely enough, I hate the idea of funerals and think that funerals are a gigantic waste. I left the home laughing.

  22. Shmoobie says:

    My grandfather was a notoriously frugal man. Always looking for a way to save a dollar.

    In around 1980 he was diagnosed with an illness and prepaid his funeral in full. In 1991 he passed away.

    After the funeral, the Funeral Director approached my grandmother and gave her a check.

    It was a refund check for a part of the price of the funeral!

    My grandfather had paid for sandwiches and beverages in 1980. In 1991 the ladies from their church came in and made the refreshments.

    So my grandfather, the most frugal and money-wise person I ever knew got a refund on his own funeral!

  23. SoCalGNX says:

    My twin relatives had a pre-paid arrangement. Years later, one of them died suddenly. The other one, who was left in charge of the others financial affairs, had to pay a considerable amount over the agreed on price to get her sister cremated. These companies find a way to hold people hostage at one of the most vulnerable times in their lives.

  24. jke101 says:

    I just went through the funeral process with my mother’s recent death. She spent 6 years in a nursing home and had almost exhausted all of her liquid assets. There was no prepayment, nor was their money for the $10,000 funeral our “friend” the funeral director suggested.

    We hated traditional funerals and looked for alternatives that would be fitting and respectful to my mother but still affordable. We joined the local memorial society which is affiliated with the Funeral Consumers of America and received a list of funeral directors who provided low cost cremations and other funeral services.

    We spent about $4000 on the cremation, memorial service at my mother’s church, and dinner for relatives and friends afterward. We saved at least $6000 and were able to limit our time with creepy funeral directors and their strange funeral practices. My advice join your local memorial society and skip dealing directly with the funeral director. You’ll get a more fitting and personalized ceremony for your loved one and save money at the same time.

  25. JiminyChristmas says:

    @sporks: I’m so glad you mentioned SCI. Few people know that when they approach a local funeral home they may be dealing with a publicly traded corporation that owns about 2000 funeral homes / cemeteries.

    SCI has bought out 100s of privately owned funeral homes over the past decade. The crafty part is that the name of the business, often a family name with a long history in the community, usually stays the same.

  26. lincolnparadox says:

    My grandmother did the same thing back in 1977, when my grandfather died. She herself lived another 14 years, but she had pre-planned and pre-paid for everything. She bought flowers for all of her kids. She chose the songs and the readings. All the kids had to do was grieve and celebrate her life.

    I’m glad this article was posted. I have always thought about pre-paying, mostly to remove the stress/gouging from my family. But now I’m going to make sure that the contract is iron-clad and that the receipts and contract all go with my probate attorney.

  27. RvLeshrac says:

    Most importantly….

    Why the #$@)#@)($(*#*(*#^*$&*^*%&(*^()#$ does it cost $5,000 for a funeral, anyway?

    That probably didn’t even include the casket.

  28. mortys says:

    Pre-planning can be one of the wisest things you could ever do for your family. You simply have to investigate who you are dealing with and ask the right questions. And, yes, I assist people with pre-planning.

    Here’s what to look for.
    Fund your plan through a mortuary and an affiliated insurance company. The company should insure people for final services only… not cars, houses, floods, etc.

    Make sure the monies you give them are guaranteed to increase in value every year.

    Ask if the mortuary guarantees they will cover the costs for the services and merchandise you select with them regardless of how much those costs increase in the future. (There will be exceptions for items they can’t control like the cost of death certificates,taxes, clergy fees, etc.)

    Ask if your plan is portable, meaning if you move, it moves with you. The original mortuary can’t guarantee you that your plan will cover the cost of the new mortuary’s services but the insurance should be honored by the new mortuary.

    Make sure the mortuary is paid by the insurance company directly and immediately so survivors aren’t burdened.

    If there are funds left over because the services or merchandise were changed to a lower cost at the time of death, ask who gets the excess. It should go back to the family.

    Yes, you can put money aside in your own special accounts for your funeral. That does nothing toward planning your funeral, conveying your wishes, or guaranteeing the cost.

    Everyone will quickly tell you that funerals are ridiculously expensive. In fact, funerals are only as expensive as you want them to be. Every funeral home has basic costs, but the family selects the type of service, the casket, the flowers, etc. They can be very expensive but they don’t have to be.

    Think of how much weddings, proms, hospital stays, etc. cost. Go into any place that offers those things and tell them you want to enter into a pre-plan with them, you want to lock in the cost of their services and merchandise today, but you won’t be using them for 5 – 10 – 15 years down the road. After they look at you like you’re nuts, see what they say. Funeral homes will do it.

    As far as the other comments about large corporations owning funeral homes I would stick with independents who have been in the community for many, many years and have a very solid reputation. Yes, there are jerks out there.

    As a side note, if you still think investing your money in your own fund is the way to go, keep this in mind. A funeral that costs $5,000 today will likely double by 2018.

    Regardless of negative articles that appear, there are tens of thousands of people who have pre-planned and pre-funded the right way with the proper funding vehicles and reputable funeral homes and their survivors are very glad they did.

  29. Anonymous says:

    It is shocking how often things like this happen. A good rule of thumb is to use a consumer advocacy service that specializes in funeral related issues to help weed out disreputable businesses and ensure that you are not spending any more than you truly want to, or on services that you really didn’t need. And never prepay for funeral goods. Remember, preplanning is good, prepaying is bad. The Funeral Consumers Alliance is a great free resource available at http://www.funerals.org, or if you’re not the do it yourself type you can use an inexpensive service such as Funeral Planners Inc located at http://www.funeralplannersinc.com

  30. Anonymous says:

    My mother was prepaying her funeral costs in installments, when I began watching her accounts I noticed that the premiums being withdrawn were more than the amount stated in the contract. When I contacted the funeral home they denied any overbilling and claimed that some ‘calculation’ by the insurance company had made an adjustment neccesary. I have spent the past month finding out the sort of nasty things about funeral parlors that many people already know. The battle continues. Good luck to others.

  31. rpartelo says:

    Father-in-law prepaid for a cremation at an out of town facility and now we are having all kinds of problems getting a local funeral parlor to have memorial services because we do not require full funeral services as his body was picked up by the contracted parlor.They have been rude and kept us waiting for two days before returning our calls and they still have not given us an answer as to wether they will help. Do not pre pay. He saved 200.00 but now we’ll have to arrange all the sevices ourselves.