Pre-Plan and Pre-Pay FAQs
Why Pre-Plan my Funeral?
You can preplan your funeral WITHOUT paying now but before deciding, it's important to compare pricing of various providers. It is important to choose a firm that has a good reputation as well as competitive prices. When your plan is complete, the funeral director will keep it on file until needed. Your estate will then pay for the services at the rates charged at the time of the funeral. Pre-planning provides an opportunity to make plans that meet your needs and wishes, and reduces the concerns of your family who would otherwise have to guess what you would have wanted.
What is Pre-Paying your Funeral and What are the Advantages?
Many people choose to prepay their funeral expenses to remove the financial burden from family members at an emotional time. You can have the peace of mind that comes with knowing that the money needed for your funeral has been set aside. If the funeral director has guaranteed the funeral, your survivors will not have to worry about how to pay the bill. When you prepay, the funeral director will provide a Pre-Need Agreement which addresses such things as how the final expenses will be determined; if additional funds will be needed when death occurs; what will happen if the merchandise selected is no longer available; and what will happen if any money remains after the final funeral bill is paid.
What are the Disadvantages of Pre-Paying your Funeral?
As with any financial transaction, there are potential drawbacks. While the "Pre-Need Funeral Consumer Protection Act" ensures some of the strongest protections in the country, it does not provide absolute protection. There are some things you must study carefully before entering into a prepaid funeral arrangement:
- Make sure you always have a pre-need agreement for services whenever you prepay a funeral, whether it is directly with a funeral firm or on your own with the funeral firm as a beneficiary.
- Let someone you trust know that you have pre-paid your funeral arrangements and the name of the funeral firm. Otherwise, they may select a different firm and pay again.
- Always deal with a familiar firm, one that you're comfortable with or that has been recommended by someone you trust.
- Know how and where your money is being deposited.
- If you pay by cash, get a receipt and keep it in a safe place.
How Do I Pre-Pay a Funeral?
Prior to making any selections with a funeral firm, the law requires the funeral director provide the following.
- A General Price List — indicates the current prices for any merchandise, services and facilities.
- A Pre-Need Itemization Statement — lists the items of merchandize, services and facilities you have chosen and the price of each. You can leave the details of some items open until you have made a final decision or until you have chosen someone to make these decisions for you.
- A Pre-Need Agreement — outlines all the terms as well as your rights as the purchaser. It must also state how the principle and interest will be applied to the cost of your funeral services and merchandise at the time provided. Funeral firms may offer a guaranteed funeral or a non-guaranteed funeral in the agreement.
What is a Guaranteed Funeral?
With a guaranteed funeral, the funeral firm guarantees to provide the services, merchandise and facilities you selected for the amount of money in your account. The guaranteed funeral is not affected by future price increases since the firm accepts the principle and interest as payment-in-full. Your estate will not have to pay anything extra for those guaranteed items. A guaranteed funeral will not include certain items such as cemetery costs, clergy fees, death certificate fees, etc. However, the funeral firm cannot charge more than the actual cost for these items.
What is a Non-Guaranteed Funeral?
With a Non-Guaranteed funeral, the funeral home provides the items and services selected at the rates charged at the time of death. The principle and interest of your account will be applied to the firm's total charges. If this amount does not cover the expenses, your estate will be charged the difference. If the amount of your pre-need account is greater than your funeral costs, the excess money will be refunded.
How will I know my money has been deposited?
The process varies from state to state and province to province. Please confirm all details with your funeral professional and / or accountant. In most regions, the funeral director must provide notification to you with all account details within a predetermined number of days from the date of the deposit. The location and amount of interest earned will appear on the IRS form 1099-INT (U.S.) or CRA form T5 (Canada) sent in January of each year. Also, upon your written request, the funeral firm must provide the total value of your account including principle and interest.
Am I responsible for paying income taxes on the interest earned by this account?
Yes. It is still your money.
Can I get my money back if I change my mind?
Yes. You can withdraw the principle and the accrued interest at any time. The funeral director cannot charge any processing, administration fees or penalties for early withdrawal.
Can my next of kin change my pre-planned or pre-paid funeral arrangement?
Yes. Changes to the arrangements can be made by your next-of-kin when death occurs. If you do not want the arrangements to be changed, speak to an attorney. An attorney can tell you what additional legal documents, beyond the pre-need agreement, are needed to prevent any changes.
What happens if the funeral firm sells its business?
Funeral firms (both the seller and buyer) must provide written notification to you WITHIN 30 DAYS of the sale. At any time, you can: change your arrangements; request your money back with interest; or give written authorization to transfer the funds to another firm.
What happens if the funeral firm goes out of business?
The funeral firm must return your money, with interest, or you can provide written authorization to transfer the funds to another firm. The funeral firm must notify the Health Department of the disposition of all money being held in trust for Pre-Need Agreements. If it fails to do so, and the owner relocates, it may be difficult to get your money back.
What can I do if I am treated unfairly?
If you think that you have been a victim of unfair or illegal practices, you can file a written complaint in writing to the Bureau of Funeral Directing (U.S.) or Cemetery and Funeral Bureau (Canada).