Should I Do A Prepaid Funeral?

A client’s son recently told me that he had a discussion with his mother on her wishes for a funeral.  His mother was very explicit on her desires to keep costs down and told him nothing extravagant should be done.  She finished by saying, “And have it on a Sunday so it will be half price.”  Now, I have no idea if Sunday’s are half price bargains or even if services can be had, but in a somewhat amusing way his mother was making clear her wishes.

One of the reasons to do a prepaid funeral is that you can make the arrangements you want.  Another advantage is that you remove that burden from your loved ones at a time when they are grieving.  A third reason is that you may be able to lock in prices, even if they increase in the future.  Also, the funds put into a properly done pre paid funeral are exempt from the Medicaid rules should you or your spouse require long term care.  Finally, it gives you peace of mind that your affairs are in order.

In Connecticut you can buy an irrevocable contract for up to $5,400 to go toward the funeral.  This includes costs such as picking up the body, embalming, viewing, funeral services, permits, etc.  In addition, Connecticut allows purchase of burial space items, which are defined as items that go into the ground, such as a casket, a vault, or a headstone.  In short, Connecticut allows you to fully prepay your funeral.  Also, it will honor an out of state contract, even if the rules are different.

People often ask what would happen if the funeral home were to go out of business.  That is a legitimate concern, and many funeral homes alleviate that concern by using the money you pay to buy a 100% paid up life insurance policy, which pays out for your funeral after you die, so the funeral home in not holding your money. 

There is one set of circumstances where it may make sense to wait to do a prepaid funeral, and that is related to Connecticut Medicaid (Title 19).  The rule is that you must spend down your countable assets to one half, but not more than $109,560.  That means if you have less than $219,120 when healthy, and buy prepaid funerals, you are reducing your start number, so the half you can keep is lower, and then you must reduce your assets to the lower amount.  This will only be true if your total countable assets are less than $219,120, but it pays to check with someone who understands the rule.

If a person does not have a prepaid funeral contract, and that person goes on Title 19 before he dies, there may be no funds to pay for the funeral and the children will then have that expense.  So the answer of whether or not to do a prepaid funeral is in most cases, yes.

A popular misconception is that a life insurance policy will take care of the funeral, but people are often forced to cash in a life insurance policy, if the cash value puts them over the $1,600 limit for Title 19.

Another problem can arise where extended family members disagree about the funeral arrangements.  This is more likely to occur with second marriages.  Connecticut has a law that permits you to do a predesignation of who you want to be in charge of your funeral, and specify exactly what you want.  People mistakenly think the executor of their will has authority for the burial, but the deceased will be long gone and cold before the will is read, so the predesignation makes great sense if there is a chance of conflict.  Either the funeral home or an attorney who deals with these issues are resources to guide you in these matters.