The following are
other items you may want to consider as you preplan your funeral arrangements:
Effect of Inflation
When prices of the funeral goods and
services being purchased are not guaranteed in the contract with the funeral
home, it is very important for you to know whether funds planned to be
available at the time of death will be sufficient to pay off the total cost of
the funeral (your available funds may include trust or insurance proceeds
and/or other funds).
A guaranteed price contract means
that the funeral home accepts your payment as payment in full at time of death
for the goods and services you selected in your contract. Your survivors
or estate will not have to pay additional funds for guaranteed contracts.
Certain items that the funeral home has no control over, such as cemetery costs
and clergy honorariums, are typically not included in the price
guarantee. State laws vary.
A non-guaranteed price contract means
that if the payment option you have chose is insufficient at time of death to
cover the total cost of the funeral you have selected, your survivors or estate
must pay any difference. Preneed funds in excess of the actual cost of
the funeral at the time of need are usually refundable to the estate, but not
in all states. Be sure to ask your funeral provider for details.
Revocable contracts usually allow the purchaser to cancel a contract and
withdraw the trust principal and any accrued interest at any time or to
transfer an insurance-funded contract to another funeral home. Some
states allow the seller to collect a trust cancellation or transfer fee.
An irrevocable contract is
an agreement that cannot be cancelled (you may, however, be able to transfer or
reassign the contract to another funeral home). Most states permit an
insurance assignment to be made irrevocably if the consumer anticipates a later
need to qualify for a public-assistance program (see Medicaid/SSI).
Initial Cancellation Period
Many states provide an initial
cancellation period when the purchaser may cancel the preneed contract and
receive a complete refund (state laws vary). Preneed contracts entered
into at a place other than the funeral home may be subject to the FTC’s 3-Day Cooling-Off Rule that allows consumers to
cancel certain types of contracts at any time prior to midnight of the third
business day after the date of the transaction. The FTC rule does not
preempt state cancellation laws. Check with your state or local consumer
office for more information about your cancellation rights. With
insurance-funded contracts, the purchaser generally has cancellation and refund
rights under the policy that exceed the rights mentioned above.
If a preneed contract funded by an
insurance policy is revoked and the purchaser cancels the insurance policy, he
or she will receive only the cash surrender value of the policy, which
typically is significantly less than the face amount of the insurance policy.
Many preneed plans offer portability
(the ability to move a plan with you to another state or to transfer it to
another funeral home). Again, state laws vary. Ask about the
specific portability and transfer features of trust and life insurance options
for funeral agreements and any impact such changes may have on price guarantees.
Some funding options have more transfer flexibility than others.
When making a preneed agreement,
identify the effect on the agreement if you ever need to qualify for Medicaid
or SSI benefits. Under Medicaid law, irrevocable funding and some
revocable funding of a preneed contract are recognized as excludable assets
that do not affect an individual’s Medicaid or SSI eligibility. States
place specific dollar limits on the amount of a preneed contract that is