Should you Prepay your Funeral Expenses
When your senior years are approaching, one natural instinct is to get your affairs in order so if your time to leave this life comes along “before expected”, your estate is ready to go. “Getting your affairs in order” means a lot of things. It means making sure your debts are paid off and your investments are where they should be. It means making sure your insurance policies, stock documentation and all other financial information is secure and where your primary caregiver can get to it to resolve your financial affairs if you are gone. And it means making sure you have a will and that it is up to date so there is no question on what should happen in the event of your demise.
One part of your final arrangements that also should get some attention from you is your funeral and your burial arrangements. For many, there is an appeal to buy your funeral plot, casket and related services in advance. The appeal of making this kind of arrangement is twofold.
First, by buying everything in advance, you are sure your will is carried out exactly as you wanted it to. You can buy the casket you want to be laid in or make arrangements for the cremation if that is your preference. You can lock down the costs for the burial and know exactly where you will be laid to rest. And that can give you a lot of peace of mind.
Secondly, it gives you peace of mind that your kids won’t have to make all of those decisions when you pass away at a time when they will already be emotionally distraught. Funeral homes provide a valuable service but they are also a business and they know that they can get grieving relatives in just after the passing and sell more expensive funeral arrangements and an elaborate casket because your kids are hurting and want to give you a fit memorial.
But there is a downside to making your funeral arrangements in advance. You should only consider it if you are sure you are not going to move again. More than once a retired couple moved to the state where the kids had relocated only to be saddled with a prepaid funeral plot in a town that will not be their final resting place.
Moreover, that prepaid funeral agreement is a contract between you and the funeral home. Mortuaries and funeral homes are licensed and regulated in most states, but not all. Make sure before you commit to a contract what will happen if something happens to that funeral home - will your state make sure that the next owners will honor your contract?
There may be some alternative ways of getting some of the decision making process out of the way without saddling yourself and your kids with an unreasonable contract that may or may not be honored years or decades from now when you are gone. Most funeral homes offer a savings plan where you pay against funeral costs each year. Then when paid up, you are only responsible for small annual increases in costs to have to pay. What this does is ensure that a contract you write and pay for today can be honored at some later time even though prices have increased. You'll know the services that your family can expect.
It is also possible to set up an interest bearing trust that is seeded with sufficient captial to pay for the services you want and have defined, and also help offset the annual increases in costs that are inevitable. By setting up a trust or simple savings account will help keep the worry about the costs of your funeral away from your grieving relatives but you give them the liberty to use those funds wisely in accordance with your instructions.
You can then use that information to write a very specific will that has rock solid instructions to your executor and your heirs that these are your wishes and they are not to be violated. Your children can take that document to that funeral home and buy only what you permitted in that will. In that way you have empowered them to be immune from the skilled sales tactics of funeral homes during that week when they are already in grief and vulnerable to suggestion.