How to Prepay Funeral Expenses: Options, Risks, and Questions to Ask

Ways to Pay for a Funeral in Advance

There is no single right method. Each approach trades flexibility against price protection.

The FTC says some states require that part of the payment be placed in a state-regulated trust, or that a life insurance policy be purchased naming the funeral home or cemetery as beneficiary. Other states offer little. Check what your state requires before choosing.

If you go the savings route, a payable-on-death designation lets the named person collect without probate. Our guide on how to change a beneficiary covers how those forms work.

Benefits and Risks of Prepaying

Possible benefits

• Fewer decisions for your family. You make the choices while you are calm and thinking clearly.
• Price protection. Some contracts guarantee today's prices for the services named. See average funeral costs for typical ranges and how pre-need contracts fit in.
• Your wishes in writing. A contract spells out what you want.

Risks to weigh

• Protection varies by state. Some state laws offer little or no effective protection, according to the FTC.
• The provider may close. Ask whether you are protected if the firm goes out of business.
• Moving or dying away from home. Some plans can transfer, often at added cost.
• Limited refunds. Ask whether you can cancel and receive a full refund.
• Plans change. You may later prefer cremation over burial, or different services.

An irrevocable contract generally cannot be canceled, which matters if your finances or plans change. Our guide to cremation vs. burial can help you decide what you want before you commit.

Questions to Ask Before You Pay

The FTC lists questions to ask any provider before prepaying. Get the answers in writing:

1. What am I paying for? Only merchandise, such as a casket and vault, or services too?
2. What happens to the money I prepay? Is it held in trust, in an insurance policy, or somewhere else?
3. Who keeps the interest on money placed in a trust account?
4. Am I protected if the firm goes out of business?
5. Can I cancel and get a full refund if I change my mind?
6. What happens if I move to a different area or die while away from home?

Also ask which items are guaranteed and which are not. Costs paid to third parties, such as a cemetery or clergy, may not be covered by a funeral home's contract.

How to Compare Prices Before You Buy

The FTC's Funeral Rule applies whether you make arrangements at the time of a death or in advance. It gives you these rights:

• Funeral homes must give you price information by phone if you ask, and you do not have to give your name first.
• You can get an itemized General Price List and keep it.
• You can buy only the goods and services you want, rather than a package you do not want.
• You must get a written statement of every good and service you select, with costs, before you pay.
• No state or local law requires a casket for cremation, and funeral homes offering cremation must offer alternative containers.
• A funeral home cannot refuse to handle a casket or urn you bought elsewhere, or charge you a fee for doing so.
• No state law requires routine embalming for every death.

Call at least three funeral homes and compare their General Price Lists line by line. Our funeral cost calculator and guide to how to plan a funeral can help you decide which items matter to you.

Medicaid, SSI, and Prepaid Funerals

If you or a relative may need public benefits, check how a prepaid funeral is treated before you buy.

SSI. Federal Supplemental Security Income rules exclude up to $1,500 each of funds specifically set aside for burial expenses from countable resources. That amount is reduced by money held in an irrevocable trust or other irrevocable arrangement that is available for burial costs. The rule appears at 20 CFR 416.1231. Whether a contract is irrevocable depends on state law.

Medicaid. Medicaid treatment of prepaid funerals is set by each state, so ask your state Medicaid agency or an elder law attorney. If long-term care is a possibility, see our guide to the Medicaid look-back period before spending or moving money, because the rules treat transfers for less than fair value as a possible problem.

This is a place where a short consultation with an elder law attorney can save money. Our guide to estate planning for aging parents explains how to find help.

Tell Your Family and Keep Records

A prepaid plan only helps if your family knows about it. The FTC advises telling your family about the plans you have made and letting them know where the documents are kept. If they do not know, your wishes may not be carried out, and they may end up paying for the same arrangements twice.

The FTC also cautions against recording funeral preferences only in your will, because a will often is not found or read until after the funeral.

Keep a copy of the contract, the General Price List you were given, and the receipt with your other important papers. Record the funeral home's name and contact details on your emergency information list. You may also want to read about organ donation and, for veterans, VA burial benefits.

If you are the family member settling a loved one's affairs and a prepaid contract exists, ask the funeral home for a written accounting of what was paid and what is covered before agreeing to any added charges. Our funeral planning guide walks through the first steps.

If prepaying is not possible, a written note of your wishes is still valuable. See what to do if you cannot afford a funeral for options.

Frequently Asked Questions