What is Pre-Need and Why Do I Need it?
July 13th, 2010
Pre-Need Funeral Arrangements
In order to be prepared for your future planning a pre-need trust is often recommended.
Pre-need trust agreements differ than funeral insurance in that this needs to be paid in full by the time of death or the balance of the funeral costs must be paid off either by the deceased estate or family members.
With a pre-need funeral arrangement, either a lump sum or a monthly amount is paid and this money is then invested in a trust fund. This fund is structured to keep pace with inflation, but like all trust funds, there is no real guarantee. Alternatively, there are funeral homes that will undertake the guarantee of payment in full. This pre-need trust fund is also taxable.
If you still want to go for a pre-need trust fund then there are a few points that could be useful. Inquire about a guaranteed price plan. This means that in the future, if the cost of goods and services raises with inflation, you will still get the current prevailing price.
Some items though like caskets, grave marker and grave liners should be bought now instead of later and the funeral home will store them for you until it is needed. You should always get a written statement for everything, including the prices for items yet to be purchased at the time of the funeral. In addition, you would need to have a full written inventory of the items kept in storage. This include the manufacturer or brand, model number, further description like material used or special inscriptions made. It is also prudent to actually know where the items are stored – get the address of the storage facility.
Find out all you can about the trust funds your payments are invested in to make sure they are viable and would increase over time. It would be also wise to have a written instruction as to how any leftover monies be disbursed.
You would also want to know the transaction is transferable or refundable should you change your mind later on and decide on a different funeral home or different cemetery.
Another risk with pre-paying is that the funeral home might go bankrupt or that the trustees of the funds are not honorable. Look also into cancellation clauses because there you might be in need of a change of plans like moving away, you have more money and want a more elaborate arrangements, or conversely you no longer find the monthly payments affordable, or if you simply changed your mind.