Thinking About a Pre-Need Funeral Plan? Here’s What You Need to Know

Estate Planning

While it’s not a subject most of us want to think about, the question of to take care of our end-of-life expenses  often sits in the background and nags at us. Yet realizing that our loved ones could get stuck with huge bills after we’re gone, pre-need funeral plans are growing in popularity—especially as the “baby-boomer” generation ages. Pre-need plans become a way for people to cover their funeral expenses (and even plan services), so their families won’t be burdened with these costs. If you’re wondering whether a pre-need funeral plan is right for you, let’s look at a few important details you should consider.

What Is a Pre-Need Funeral Plan?

Specifically, a pre-need funeral plan is an arrangement you make with a specific funeral company to cover details relating to your death. As this article in the New York Times points out, pre-need does not mean prepaid-in-full.

Pre-need simply refers to making plans regarding end-of-life decisions. While it can include prepaying for items—such as your coffin, dressing/embalming, chapel fees, headstone, cemetery plot, etc.—more typically, it involves making payments into an interest-bearing third-party account (a trust, insurance policy or escrow account).

Therefore, prepaying may lock in these costs; however, prices are not automatically locked in. That only happens with a guaranteed plan. Some plans are non-guaranteed. With these plans, the money you paid will go toward costs of those services at the time of death, but your family will pay any remaining costs—those that exceed the amount you had in the pre-need account.

That said, both guaranteed and non-guaranteed plans should be interest-bearing accounts so, in the end, your family could get more out than you paid in.

What If Circumstances Change?

Pre-need funeral plans are made with a specific funeral home in mind—but what if the funeral home goes out of business? Or what if you move to another state? What happens to your money when circumstances change?

If your plan is a good one, it will have the flexibility to deal with these changes. Remember, the funeral home itself isn’t keeping your money—it’s going into a third-party account, so the money remains yours, regardless of what happens to the funeral home.

You’re Entering into a Contract

As with any agreement, always know exactly what it covers—what you are obligated to do, and everything that the other party has agreed to, as well. The whole idea is that your planning ahead, and understanding that plan, is absolutely essential. But once you’ve done so, you and your family may find a new peace of mind.

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