KFOR-TV: What You Should Know About Prepaid Funeral Plans
Prepaid funeral plans promise peace of mind — but understanding what’s covered, what’s not, and what can change is crucial before you sign.
Watch segment on KFOR-TV
Planning your own funeral may not be high on your to-do list, but it can be one of the most considerate decisions you make. By thinking ahead, you can ensure your wishes are honored while relieving your loved ones of the stress and uncertainty that often comes during a difficult time.
Why Planning Ahead Matters
Preplanning your funeral gives you the opportunity to make thoughtful choices about the type of service you want and to compare providers at your own pace. It also removes the emotional burden from your family, who might otherwise have to make these decisions under pressure.
That said, planning ahead doesn’t necessarily mean you should pay for everything in advance. The Funeral Consumer Alliance, a national nonprofit focused on consumer protection, generally advises against prepaying unless you need to reduce your assets to qualify for Medicaid.
Understanding Preneed Plans
Many funeral homes offer “preneed plans,” which allow you to arrange your funeral in advance and pay for it either in a lump sum or through installments. Typically, your funds are placed in a trust that pays out upon your death or used to purchase a life insurance policy naming the funeral home as the beneficiary.
While these plans can offer convenience, not all contracts are the same. Some guarantee services at today’s prices, while others may leave room for additional charges if costs rise over time.
Questions to Ask Before You Prepay
If you’re considering a prepaid plan, make sure you understand the details. Ask:
- Can I cancel the contract, and what refund would I receive?
- How are my funds held and protected, and who benefits from any interest earned?
- If this plan involves insurance, is there a waiting period before full benefits apply?
- Are prices guaranteed, or could additional costs arise later?
- What happens if the funeral home closes or is sold?
- Can the plan be transferred if I move?
- What happens to any unused funds after services are provided?
If you do move forward, get all details in writing and share copies with your family. Without clear communication, your plans could be overlooked, or your loved ones could end up paying for services that have already been covered.
Alternatives to Prepaying
From a financial standpoint, there are often more flexible options than prepaying your funeral.
A life insurance policy can provide a lump-sum payment to your beneficiaries shortly after your death, allowing them to cover funeral costs without going through probate.
Another option is a payable-on-death (POD) account at your bank or credit union. This type of account lets you name a beneficiary who will receive the funds directly upon your death. You maintain full control of the account during your lifetime—you can access the money, earn interest and change the beneficiary as needed. After your passing, the funds are transferred quickly without probate delays.
Planning your funeral in advance is a wise and thoughtful step, but prepaying requires careful consideration. By understanding how prepaid plans work, and exploring alternative options, you can make decisions that protect your finances while ensuring your final wishes are carried out with clarity and care.