Preplanning for Funeral Expenses

Thinking about your own death or that of your loved ones isn’t easy. Death is something that most of us tend to think of as a far-in-the-future event, though logically we know that it can happen at any time. But planning for your death in advance allows you to make informed choices about how your body will be disposed of, what type of funeral or memorial service you wish to have and how much you wish to spend on these things. It also gives you time to contact providers, compare prices for various services and budget for final expenses before they come due. Additionally, and very importantly, pre-planning allows you to discuss your choices with your loved ones so they don’t have to make difficult decisions and complex arrangements in the immediate aftermath of your death.  

Virtually all arrangements around final disposition can be planned in advance. For example, you can choose whether you wish to be cremated or buried, whether or not you wish to be embalmed, and what kind of celebration of life or memorial service you would like to have. You can also choose where you wish to be buried or, if you choose cremation or aquamation (alkaline hydrolysis), where your ashes should be stored or dispersed. Sea burial, donating your body to science or donating tissue and organs are other options you may wish to explore. If legal in your state, you may also choose natural organic reduction (NOR), commonly known as human composting.  You may also consider looking for a cemetery that allows for green burial; this method of final disposition is becoming more popular as people realize the impact of their choice on our environment.  Pre-planning will give you the opportunity to look at all of these things and make a truly informed choice. 

With that being said, making all of these decisions and arrangements is not a simple process, which is why starting early is always a good idea.

Four Phases of Pre-Planning for Funeral Expenses

Planning for any major life event is a huge undertaking. Engaged couples and their families spend months — if not years — planning weddings, attending to every detail with the utmost care. Planning for what happens after you die requires the same attention to detail if you want to ensure that your wishes are carried out. But the process doesn’t need to be daunting. It can actually be enjoyable if you break it down into these manageable steps.

Determine your choices around final disposition

Before contacting providers or seeking out specific services, spend some time thinking about what you want to happen after you die. Your decisions will likely be informed by your values, beliefs and religious affiliation as well as the traditions of the culture to which you belong. But even within that framework, there are usually many options from which to choose. Here are some of the questions you will need to answer:

• Do you wish to be buried or cremated? Or do you have another choice in mind?
• Do you want your body to be embalmed? (Except in rare cases, embalming is not mandated by law.)
• Do you want a viewing? If so, where should it be held? In your home? At a funeral home? Somewhere else?
• Would you consider a home funeral, or do you want a funeral home involved?
• Do you want a formal ceremony to commemorate your death? What kind? 
• Would you like to have a departy or a celebration of your life before you die? 
• Do you wish to donate organs or tissue?
• If you are being buried, what kind of coffin do you want and where do you want to be buried?
• If you are being cremated or aquamated, what do you want to happen to your ashes afterward?

Be sure to discuss these and other decisions with your loved ones, and document them in your advance directive. That’s the best way to ensure that your wishes will be honored when the time comes. 

Decide on a funeral budget 

In the U.S. today, many people mistakenly believe that a “traditional” funeral is the only way to say goodbye to those we love. But as the cost of funerals, burials, and/or cremations has skyrocketed over the past few decades, many people have come to question that philosophy and look for more budget-friendly ways to dispose of and commemorate their dead. After all, the love we feel for each other can’t be measured in dollars and cents — a simple home funeral followed by direct cremation or immediate burial can save you thousands of dollars and be even more personally meaningful for your loved ones than an expensive funeral and burial with all of the trappings offered by a funeral home. It may also be possible to bury a loved one on your own property.  You just need to consult with your local health department to make sure you follow all county setback rules.  Just consider these approximate costs provided by Lincoln Heritage Insurance in 2024:

Basic Funeral Services: These are the costs associated with the use of a funeral home for either burial or cremation.

• Basic service fee — $2,300
• Transportation of the body to the funeral home — $350
• Preparation of the body — $275
• Embalming — $775
• Car for the transportation of flowers and other belongings — $130
• Use of the staff and facility for the viewing and funeral — $915
• Hearse — $350
• Memorial print package, including items such as memorial directories, registration book and acknowledgement cards — $130

Total — $5245

Additional Burial Costs

• Burial plot — $525-$5000
• Burial vault — $550-$7500
• Opening and closing fee — $350-$3500
• Casket — $2500 and up

This brings the total cost of a funeral and burial before the purchase of a casket to at least  $6,500 and well over $10,000 after adding even a modestly priced casket purchased from a funeral home.

Additional Cremation Costs

• Casket rental — $1,000
• Urn — $250
• Cremation — $300

Again, this represents the average cost of these items if you purchase them from a funeral home in the United States.  

It is very important to note, however, that none of these purchases is mandated by law, and consumers have the right to decline any of them with the exception of the basic service fee. Per the Funeral Rule of 1984, you have the right to purchase your casket elsewhere; the funeral home must accept this casket and is not allowed to charge you a handling fee.  

By contrast, a home funeral, in which family and loved ones care for the body and hold a viewing in the home, is almost cost-free. It does involve some preparation, however. The body will need to be kept cool with ice or cold packs, and after-death care will require the participation of a few people who are physically strong enough to turn the body and move it when the time comes to transport the person to their final destination. The family may also need to rent a truck or large SUV to transport the body if they choose to do so themselves, and you will need to purchase a burial container of some sort (required for both burial and cremation). However, this can be a very inexpensive cardboard container or an affordable coffin purchased from an independent vendor on the internet.

Add to this the cost of direct cremation — about $700 on average across the United States — and you can plan a loving, meaningful, dignified funeral for under $1,000. 

Find service providers

Once you have determined your choices for final disposition and how much you wish to spend, it’s time to search for providers and begin to compare costs. It’s a good idea to start your search by speaking with friends and family to see if there is a specific provider they recommend. You can also search online to find providers in your area and look at Better Business Bureau ratings and reviews. 

As you begin to contact providers, keep in mind that the Federal Trade Commission’s Funeral Rule requires that all providers of funeral services, including crematories and cemeteries, give a written, itemized price list of all of the goods and services they offer to anyone who asks for one. (This is known as the general price list, or GPL.) This list is yours to keep, so it’s a smart idea to request one from each provider you visit, and then compare costs when you get home. Pricing can vary greatly even among providers in the same general vicinity, so this is a crucial step. 

Another important point to consider is the FTC’s requirement that consumers must be allowed to choose only the goods and services they want from the general price list. Many funeral providers will entice customers with “package deals,” but you have the right to purchase only the line items you truly want. Many of the goods and services offered by funeral homes can be purchased elsewhere at a much more affordable price. (Note: the Funeral Rule does not apply to third-party sellers or cemeteries.)

Keep in mind, too, that many states license funeral directors and embalmers, although licensing requirements vary a great deal. In California, for example, the Cemetery and Funeral Bureau (CFB) licenses all funeral establishments, all funeral directors, and all privately owned cemeteries. It also maintains a publicly available database that allows consumers to verify a provider’s license status, including any citations it has received. You may also call the CFB at (916) 574-7870 to verify a license if you have difficulty doing so online. 

Finalize your choices and how you wish to pay for them

After comparing funeral service providers and costs, the next step is to decide what goods and services you want to purchase and how you will pay for them. Many funeral service providers offer what are known as “preneed plans,” which are a contract between the consumer and the service provider in which the consumer agrees to buy goods and services in advance of their death and funds the purchase through an annuity, a life insurance policy or a trust. At the time of the agreement, a third party, usually an insurance company or a trustee, assumes responsibility for managing the funds. When the individual dies, the funds are released to the funeral home or cemetery to pay for the goods and services the person chose. 

Pros and Cons of Pre-Need Plans

Pre-need funeral or cremation plans involve a significant financial investment, so it’s important to weigh the pros and cons carefully before you decide to enter into a pre-need contract. According to Lincoln Heritage Insurance, these are some of the benefits and pitfalls:

PROS

• Peace of mind in knowing that your loved ones will not be burdened with planning and paying for your funeral when you die. 
• You choose where you are going to be buried or cremated. 
• Most of the time prices are guaranteed, which means you lock in today’s prices. Since funeral costs generally go up year to year, this could represent considerable savings.
• You pay only for what you want and need.

CONS

• If the funeral home you contract with goes out of business, your family may need to assume the responsibility for your funeral expenses regardless of the contract you had. 
• Most pre-need plans are not transferable, so if you move to a new location you may be unable to use the plan you paid for.
• Refunds are not always available when you enter into a pre-need contract. So if you change your mind, money you’ve paid into the account may be lost. Also be sure to check that your policy has guaranteed prices (and what items are part of that guarantee); do not assume prices are guaranteed. 
• The amount of the contract is paid directly to the funeral home or crematory, not your next of kin. 

Further, the laws around preneed agreements vary widely from state to state, so legal protections for consumers vary a great deal as well. What’s more, the Funeral Rule offers no protection to consumers who enter into preneed contracts, and there are no minimum federal standards as to what a preneed contract should include. Additionally, the federal government does not require full disclosure of pre-need contract terms, so the consumer may inadvertently assume a great deal of risk. 

To help protect yourself before entering into a preneed contract, it is advisable to get answers to the following questions in writing before you sign any documents:

• How long does the policy take to pay off the contract? What happens if I die before it has been paid off?
• What happens if the funeral home closes or changes ownership?
• What specifically is included in the pre-need contract? Are there any exclusions?
• What happens if I move away? Can I transfer the contract to another funeral home?
• Are prices guaranteed regardless of whether costs increase? What items are excluded from the guaranteed prices?
• What interest rate do I earn on the money paid? Where does the interest go? 
• Can I cancel the contract if I change my mind? Will I get a refund of the full amount paid?
• If there is money left in my account after the funeral, where does it go? 

Additional Ways to Fund Your Expenses in Advance

A preneed plan is not the only option available to pre-plan for final expenses. Once you have an idea of how much your preferred method of disposition and ensuing memorial (if you want one) will cost, you can choose one of the following instead. We recommend investigating the benefits and drawbacks of each to make sure it is the right choice for your situation:

Purchase Final Expense Insurance

Final expense insurance policies are typically relatively small life insurance policies of $5,000 to $30,000 that consumers purchase specifically for funeral and burial costs. They are generally very easy to qualify for and require no medical exam. When you die, the amount of the policy is paid directly to your beneficiaries, who can then use the money for funeral expenses and any other final bills. 

Create a Payable Upon Death (POD) Account or Totten Trust

A payable upon death account is a simple and effective way to transfer money to a named beneficiary after your death. You may designate any account you own as a POD account — checking, savings, CDs, and other deposit certificates are all eligible. You simply notify your financial institution of the named beneficiary (only one beneficiary is allowed) who fills out a form and returns it to the bank. The beneficiary can then withdraw the funds — avoiding probate — upon providing proof of your death to the bank. 

Open a Joint Savings Account

Probably the simplest way to set money aside for your funeral and memorial expenses, a joint savings account allows either account holder to withdraw funds at any time. This allows the joint account holder to withdraw funds for your final expenses immediately upon your death, without providing a death certificate. Additionally, money in the account can be used for expenses incurred before you die, such as home caregivers or medical bills. 

Conclusion

In summary, pre-planning for funeral expenses is an important part of end-of-life planning. The process involves 

• Researching options for final disposition of your body after death
• Choosing a method of final disposition
• Researching costs among local service providers
• Choosing how to pay for your funeral and final expenses among the various options available to you. 

Handling these important decisions before your death can give you peace of mind and spare your loved ones the financial and emotional burden of arranging your funeral while also grieving your loss. 

Need more information about funeral planning? See our Comprehensive Step-by-Step Planning Guide: Choosing Funeral Arrangements and Final Disposition for detailed explanations of options and action-steps.

Sources:

“Pre-planning and Pre-paying”. Funeral Consumers Alliance. https://funerals.org/get-help/pre-planning-advance-directives/

“How Much Does a Funeral Cost?”. Lincoln Heritage Funeral Advantage. https://www.lhlic.com/consumer-resources/average-funeral-cost/#breakdown

“Licensing Boards and Requirements”. National Funeral Directors Association. https://nfda.org/careers/licensing-requirements

“Payable Upon Death Accounts Benefits and Drawbacks”. Investopedia. https://www.investopedia.com/terms/p/payableondeath.asp

Funeral expenses are not tax-deductible for individual taxpayers, but some estates may be eligible for a deduction. If the estate’s funds were used to pay for the funeral expenses, a deduction may be possible if the estate is above the federal estate tax exemption limit for the relevant tax year. Most estates typically do not meet the exemption limit, so the estate deduction is rarely used. 

If the estate meets the limits, funeral expenses must be claimed by using Form 706: Schedule J, Funeral Expenses and Expenses Incurred in Administering Property Subject to Claims. The purpose of this form is to itemize any eligible funeral expenses and calculate the total funeral expenses for the claim. Any funeral costs that were reimbursed must be deducted from the total expenses before they are claimed on Form 706. For example, if Veterans Affairs or Social Security death benefits were received, these funds would be deducted from the total expenses.

Only certain funeral expenses are considered tax-deductible for estates that claim the deduction. Generally, travel expenses for funeral guests or costs that were paid by an insurance policy are not deductible. Common funeral expenses that are deemed appropriate for deduction may include: 

• Burial plot and burial
• Embalming 
• Cremation
• An urn or casket 
• Green burial services
• Gravestone, tombstone, or grave markers 
• Funeral service arrangement costs, including some services
• Funeral home facility costs and fees 
• Transportation costs for family members and the person who died 
• Religious leader service fees
• Catering for the reception 

Overall, funeral expenses are not deductible for individual taxpayers but may be deductible under certain circumstances for an estate. Reviewing the IRS guidelines can provide more insight into the eligibility requirements for these deductions. Individuals who are in the process of settling an estate or have previously settled an estate are encouraged to consult with a tax expert for professional advice and guidance on accurate reporting for federal tax returns.

Sources 

“Tax Deductions for Funeral Expenses”. Intuit Turbotax. https://turbotax.intuit.com/tax-tips/family/tax-deductions-for-funeral-expenses/L7pVU9Hlf 

“Are Funeral Expenses Tax Deductible?” Smart Asset. https://smartasset.com/taxes/are-funeral-expenses-tax-deductible 

Yes, it is possible to pay for a funeral using a credit card. Most funeral homes accept credit cards as a valid form of payment, providing a potential solution for those who may be concerned about how to pay for a funeral with no money readily available. This method can provide immediate funds, enabling loved ones to commence with arrangements for a funeral service, burial, cremation, celebration of life or memorial service, etc., without the stress of gathering the often considerable money required. However, it is crucial to remember that charging large expenses to a credit card can lead to high-interest debt if not paid off promptly. Further, in some states funeral homes can charge a convenience fee for using a card. 

If paying for funeral expenses with a credit card is your best option, it can be a good idea to find one with a 0% Annual Percentage Rate (APR) so you can avoid paying interest costs for a period of time, typically ranging from six to 21 months. Always consider all your options and consult with a financial advisor if necessary.

Sources

“How to Pay for a Funeral: Your Complete Guide”. Lincoln Heritage Funeral Advantage. https://www.lhlic.com/consumer-resources/how-to-pay-for-a-funeral/ 

“How do 0% APR credit cards work? 8 things to know before applying”. CNBC Select. https://www.cnbc.com/select/how-do-0-apr-credit-cards-work/ 

Having an open and honest conversation with your loved ones regarding your final arrangement wishes  is essential. Since these conversations can be difficult, it is important to be compassionate, patient, and sensitive to the emotions and concerns of your loved ones. They may have questions about your wishes and the rationale behind your plans. So it is equally important to dedicate time to address their concerns and help them understand how these decisions align with your values. 

Since this is typically a very personal conversation, it should generally occur in a private setting. You can initiate the conversation when you begin planning or discuss it after all the arrangements have been made. Some individuals prefer to start the discussion when they begin planning since it allows them to involve their loved ones in the process. However, other people prefer to have this discussion after completing all the arrangements since it can give their loved ones peace of mind, knowing that everything has already been taken care of. In either scenario, a common way to start this conversation is by telling your loved ones that you are making these arrangements to reduce the possibility of any burdens or additional responsibilities falling on them after you are gone. 

Ideally, before you have the conversation, you have already created essential documents, such as your advance directive, will, and financial power of attorney. Many people do not understand the legal significance of these documents and why they are an essential component of planning. Therefore, you may have to explain the purpose of these documents and how they work together to lessen the burden on your loved ones. You can remind them that these documents are tangible references they can refer to so they can honor your wishes if you become incapacitated or die. 

Remember to encourage your loved ones to share their thoughts and ask questions. Take time to listen to what they are concerned about, validate their emotions, and provide them with gentle reassurance or additional information so that they can understand the reasoning behind your decisions. Some of your loved ones may not have any knowledge or experience surrounding final arrangements and end-of-life plans. So, it is essential to be patient with them and help them understand why these decisions are meaningful. Although these are challenging conversations, addressing them together can provide peace of mind and comfort. Rest assured that providing your family or friends with this information will be the greatest gift you can ever give them.

Sources

“How to Start a Conversation About End-of-Life Care”. AARP. https://www.aarp.org/caregiving/basics/end-of-life-talk-care-talk/ 

“How to Talk About Final Wishes with “Difficult” Loved Ones”. Neptune Society. https://neptunesociety.com/Resources/Grief-Support/Talk-About-Final-Wishes-with-Difficult-Loved-Ones 

“Living wills and advance directives for medical decisions”. Mayo Clinic. https://www.mayoclinic.org/healthy-lifestyle/consumer-health/in-depth/living-wills/art-20046303 

“What is a Durable Financial Power of Attorney (DFPA)?” FreeWill. https://www.freewill.com/durable-financial-power-of-attorney

The most effective way to shop for funeral providers includes the following steps:

• Conducting thorough research regarding your options
• Contacting and visiting funeral homes you’re interested in
• Examining pricing transparency
• Avoiding any attempts to upsell you additional services.

Being mindful of these factors will help you stay within your budget while honoring your preferences and needs. Understanding the laws surrounding funerals and burials is also essential to ensure you know what services are required versus those that are optional. You should  review the Funeral Rule to learn your consumer rights before you shop around. 

Researching funeral providers in your area will give you insight into their customer service, quality, available services, and the costs. If there are specific services or options that are especially important to you, this will also be an opportunity to discover which funeral providers can accommodate your requests. Before you conduct any research, ensure that you have fully defined what your preferences are for your final arrangements.

When you have narrowed your options to a few different funeral providers, call them to ask any questions that you cannot find answers to on their website or in online reviews, and schedule an appointment to visit in person. Visiting several funeral homes can give you more insight into the quality of the overall services, the funeral provider’s attention to detail, how they interact with clients, and the variety of products and services available. Were you treated respectfully when you visited the funeral home?  Did they answer all your questions?

Finally, avoiding potential attempts to upsell additional services is critical. Unfortunately, grief can affect decision-making when shopping for funeral services, and it is not uncommon for bereaved individuals to overpay for services. The Federal Trade Commission (FTC) Funeral Rule requires funeral providers to give you a copy of an itemized price list when you visit; provide pricing information over the phone; and give you a written statement of fees before payment when you have decided what services you want to purchase. Additionally, you are nott required to choose embalming or to use the caskets or urns sold by the funeral home or crematory. Moreover, the provider cannot charge additional fees if you purchase these items elsewhere. By understanding your rights and recognizing tactics to upsell services, you can identify a funeral provider that is fully transparent and compliant with the FTC Funeral Rule.  

• Conducting thorough research regarding your options.
• Contacting and visiting funeral homes you’re interested in.
• Examining pricing transparency.
• Avoiding any attempts to upsell you additional services.

Being mindful of these aspects will help you stay within your budget while honoring your preferences and needs. Understanding the laws surrounding funerals and burials is imperative to ensure you know what services are required versus optional. 

Although researching potential funeral providers can be time-consuming, it is essential to your ability to make an informed decision. Researching your area’s funeral providers will help you gain insight into their customer service, quality, available services, and the costs associated with those services. If there are specific services or options that are especially important to you, this will also be an opportunity to discover which funeral providers can accommodate your requests. Before you conduct any research, ensure that you have fully defined what your preferences are for your final arrangements.

When you have narrowed your options to a few different funeral providers, you should contact them directly. You can call them to ask any questions that you couldn’t find answers to on their website or in online reviews. Still, you should also aim to schedule appointments to visit each funeral home in person. Visiting the funeral homes can give you more insight into the quality of the overall services, the funeral provider’s attention to detail, interactions with other clients, and the variety of services and caskets available at the location. 

Finally, examining pricing transparency and avoiding potential attempts to upsell additional services are critical. Unfortunately, grief can affect decision-making when shopping for funeral services, and it is not uncommon for bereaved individuals to overpay for services. The Federal Trade Commission (FTC) Funeral Rule requires funeral providers to give you a copy of an itemized price list when you visit; provide pricing information over the phone; and give you a written statement of fees before payment when you have decided what services you want to purchase. Additionally, you aren’t required to opt into embalming or to use the caskets or urns sold by the funeral home or crematory. The provider cannot charge additional fees if you purchase these items elsewhere. By understanding your rights and recognizing tactics to upsell services, you can identify a funeral provider that is fully transparent and compliant with the FTC Funeral Rule.  

The most effective way to shop for funeral providers involves conducting thorough research regarding your options, contacting and visiting funeral homes you’re interested in, examining pricing transparency, and avoiding any potential attempts to be upsold on additional services. Being mindful of each of these aspects will help you to stay within the constraints of your budget while still honoring your preferences and needs. It is also incredibly important to understand the laws surrounding funerals and burials to ensure that you are aware of what services are required versus optional. 

Although researching potential funeral providers can be time consuming, it is an essential factor in your ability to make an informed decision. Researching the funeral providers in your area will help you to gain insight into their customer service, quality, available services, and the costs associated with those services. If there are specific services or options that are especially important to you, then this will also be an opportunity to discover which funeral providers are able to accommodate your requests. Before you conduct any research, ensure that you have fully defined what your preferences are for your final arrangements.

When you have narrowed down your options to a few different funeral providers, you should reach out to them directly. You can call them to ask any questions that you couldn’t find answers for on their website or in online reviews, but you should also aim to schedule appointments to visit each funeral home in person. Visiting the funeral homes in person can give you more insight into the overall quality of the services, the funeral provider’s attention to detail, interactions with other clients, and the variety of services and caskets that are available at the location. 
Finally, examining pricing transparency and avoiding potential attempts to be upsold on additional services are especially important. Unfortunately, grief can affect decision making when shopping for funeral services and it is not uncommon for bereaved individuals to overpay for services. The Federal Trade Commission (FTC) Funeral Rule requires funeral providers to give you a copy of an itemized price list when you visit, provide pricing information over the phone, and give you a written statement of fees prior to payment when you have decided what services you want to purchase. Additionally, you aren’t required to opt into embalming or to use the caskets or urns sold by the funeral home or crematory, and you shouldn’t be charged additional fees if you choose to purchase these items elsewhere. By understanding your rights and recognizing tactics to upsell services, you can identify a funeral provider that is fully transparent and compliant with the FTC Funeral Rule. 

Sources

“5 Steps to Take When Comparing Funeral Service Providers”. Aging Care. https://www.agingcare.com/articles/comparing-funeral-service-providers-158961.htm 

“When Shopping for Funeral Services, Be Wary”. New York Times. https://www.nytimes.com/2022/05/06/your-money/funeral-cremation-fraud.html 

“How To Choose A Funeral Home”. Funeral Consumers Alliance. https://funerals.org/get-help/making-decisions/how-to-choose-a-funeral-home/ 

You may save money on final expenses in several ways, including

• Opting for cremation instead of burial
• Comparing potential costs to identify the most affordable options,  
• Skipping unnecessary services
• Taking a do-it-yourself approach to handling the arrangements.

Choosing cremation

Direct cremation is one of the more affordable alternatives to a traditional burial. It is usually cheaper than a burial since it eliminates the need for a burial plot, headstone or an expensive casket for display. However, direct cremation does not include a viewing, so it may not be an ideal option if you wish to allow loved ones to pay their last respects. However, many funeral homes offer cremation with the possibility of memorial services or other opportunities for remembrance. 

Comparing costs

As with any significant purchase, comparing potential costs and searching for the most affordable quote is critical. Funeral costs and associated expenses can vary widely among funeral homes and crematories, so it is crucial to research options and contact them directly to learn more about the expected costs.

Declining nonessential services

Many services offered by funeral homes are unnecessary or optional, and you can decline them to reduce costs. For example, embalming is typically not legally required and may not be necessary, depending on your preferences for a viewing or burial. Vaults are also not always necessary; traditional or hybrid cemeteries may require them, but no natural burial ground will require a vault.. Choosing to opt out of either can help save significant costs in the long run. 

Taking a DIY Approach

Finally, taking a do-it-yourself approach to final arrangements can also be a great way to save money. For example, allowing loved ones to customize and decorate a cardboard casket can significantly reduce expenses. Green burial with a shroud or a woven fiber casket is another option that is usually much cheaper than a traditional burial with an expensive casket.  

Sources 

“Ten Tips for Saving Funeral Dollars”. Funeral Consumers Alliance. https://funerals.org/get-help/how-to-save-money/ten-tips-for-saving-funeral-dollars/ 

“How Much Does Cremation Cost?” Choice Mutual. https://choicemutual.com/blog/cremation-cost/ 

“Smart Ways to Save on Funeral Costs”. Kiplinger. https://www.kiplinger.com/article/retirement/t021-c000-s004-smart-ways-to-save-on-funeral-costs.html 

“What Are Cardboard Caskets?” Funeral Circle. https://funeralcircle.com/cardboard-caskets/ 

“Guide to Green Burial – A Natural Approach to Funerals”. Lincoln Heritage Funeral Advantage. https://www.lhlic.com/consumer-resources/green-burial/ 

In 2024, you will find that the average cost of a funeral is at least $11,000. However, these costs can vary based on factors like your location, the type of service you choose, your preferences, and any additional services you may want, such as embalming or a monument. It’s important to be aware that expenses can increase quickly if you add extras suggested by the funeral director. To effectively budget for a funeral or memorial service that aligns with your personal values, you should identify your preferences and alternatives in advance. 

As a general guideline, you should take the time to consult with multiple funeral homes and request their full price lists. Remember, funeral homes are required by the Federal Trade Commission to provide price information if you ask. Most funeral homes offer a variety of services that you can decline to reduce expenses, and they will disclose these options if you inquire.

When budgeting, you’ll need to factor in costs related to burial or cremation, embalming, the casket, transportation, flowers, memorial items, obituary notices, special ceremonies, headstones, markers, and any other available services. Keep in mind that some services and ceremonies may be more elaborate and, therefore, more expensive than others.

Additionally, the casket is often the most expensive part of the funeral, with prices reaching up to $10,000 depending on the style and material you choose. To save a significant amount of money, be selective about the casket you pick. Buying from a third-party vendor instead of the funeral home can greatly reduce your costs and it is the right of every consumer to purchase a casket from an outside vendor (e.g., Walmart, Titan Casket, etc).  Furthermore, alternative options like cardboard or fiber caskets are often significantly cheaper compared to traditional caskets made from rolled steel or other materials.

Sources 

“Funeral Costs and Pricing Checklist”. Federal Trade Commission. https://consumer.ftc.gov/articles/funeral-costs-pricing-checklist ther materials.

What will happen if a prepaid funeral plan hasn’t been paid in full at the time of death depends on the circumstances and the type of plan. If the purchaser of the plan opted for a fully-insured policy, full death benefits will usually be provided even if the plan was not paid in full. However, these plans can be contested within two years of the plan’s purchase and the provision of benefits can be denied if the death was due to suicide or if fraudulent information was provided on the application. 

Another possibility is that the family of the person who died may be required to cover the remaining balance since there were n’ot enough funds in the prepaid plan to cover the cost of selected services. Depending on how much money was already deposited into the plan, it may be challenging for loved ones to cover the remaining expenses. Sometimes the funeral home or crematory will provide the family with the option to downgrade goods or services in an effort to reduce the unpaid balance. It may also be possible to work with the funeral provider to establish a payment plan or determine financing options. 

Sources

“10 Questions to Ask Before You Prepay Your Funeral”. Funeral Basics. https://www.funeralbasics.org/10-questions-ask-before-prepay-funeral/ 

You may be able to transfer a funeral contract to another funeral home depending on the terms outlined in the agreement. Some funeral homes are willing to accommodate requests for transfer, but not all funeral homes can do this. Contacting the current and potential new funeral homes can provide more insight as to whether this is possible.

If the funeral home indicates that transferring the contract is possible, you must work closely with the current and new funeral home to facilitate the process. The current funeral home will provide guidance about what you need to do to initiate the transfer, such as making a written request or completing specific paperwork to provide consent. The new funeral home will review the contract to determine how much it can be honored. For example, if the original contract specifies prices for goods and services, the new funeral home must decide whether it can fulfill those agreements. 

It is also important to know that transferring a funeral contract to another funeral home may incur additional costs. There may be administrative fees or other charges associated with making the transfer. Similarly, depending on what the new funeral home will honor, you may incur additional expenses if the new provider does not include specific goods or services. 

Sources

“Planning Your Own Funeral”. Federal Trade Commission. https://consumer.ftc.gov/articles/planning-your-own-funeral

If the total funeral costs are less than the amount deposited into a prepaid funeral plan, what happens to the remaining money is based on the terms and conditions of the preneed contract. It can also vary depending on the type of prepaid funeral plan selected. If the funds in a prepaid plan are distributed to the funeral home responsible for providing the goods and services, the funeral home will follow its refund policies. Sometimes, the next of kin can reallocate the remaining funds to additional services or expenses, such as upgrading floral arrangements or the casket. 

Some funeral homes have prepaid plans that allow a refund of all excess funds, which can help cover other expenses. However, refunds are not guaranteed and can vary depending on the plan and provider, so this is not an ideal option to ensure financial coverage of any additional expenses aside from the funeral. When refunds are allowed, they are typically paid out to the estate of the person who died, the purchaser of the prepaid plan, or a beneficiary. 

The state where the funeral provider is located may also have laws about preneed plans. For example, whether a refund is possible can depend on whether the state deems the prepaid plan revocable or irrevocable. Additionally, some plans that include refunds may include administrative fees or other charges that may reduce the total amount refunded to the estate, beneficiary, or purchaser.

Funeral expenses often exhaust most of the funds in a prepaid plan. However, you should carefully review the terms and conditions of the program to understand your options regarding excess funds. 

Sources

“How Does A Prepaid Funeral Plan Work?” Titan Casket. https://titancasket.com/blogs/funeral-guides-and-more/how-does-a-prepaid-funeral-plan-work 

“Complete Guide to Prepaid Funerals: Plan, Costs, Pros & Cons”. Lincoln Heritage Funeral Advantage. https://www.lhlic.com/consumer-resources/how-pre-paid-funeral-plans-work/ 

Funeral homes can guarantee the prices for specific goods and services in your funeral contract if you select a guaranteed prepaid funeral plan. When you agree to a guaranteed plan, prices for the designated goods and services will remain effective according to the terms of your plan even if the funeral home eventually increases its prices. This means that your loved ones will only pay the prices that were current at the time that you entered into the funeral contract. 

It is important to note that these secured prices are only possible if you agree to a guaranteed funeral contract. A non-guaranteed contract or plan does not provide the same level of protection from rising expenses. Instead, it covers funeral expenses only to the extent that you have pre-paid for them and serves as a deposit for your goods and services with the expectation that the final cost and any additional expenses will be covered by your loved ones. 

Estimating the total amount of prepaid funds to cover funeral expenses can be challenging due to fluctuating costs caused by inflation or other economic factors. However, opting for a guaranteed contract offers predictability by securing current costs and keeping them effective until the time of need. This provides assurance and peace of mind, ensuring that potential expenses are managed effectively.

Sources

“3 Ways to Protect Your Funeral Funds”. Funeral Basics. https://www.funeralbasics.org/protecting-your-funeral-funds/ 

“How to plan your own funeral”. Memorial Planning. https://www.memorialplanning.com/resources/planning-ahead/how-to-plan-your-own-funeral/ 

You can generally change the goods and services selected when you establish a funeral contract if it is allowed within the terms and conditions of the agreement. However, it is essential to be mindful when making changes since it may impact the guarantees made in the initial contract. For example, changing the contract may negatively impact qualifying for assistance if the money paid into a funeral plan includes excludable resources that affect your Social Security Income (SSI) or Medicaid eligibility. If this is a potential concern, most funeral directors can provide additional guidance regarding contract changes and preplanning concerning SSI and Medicaid requirements. 

You may also be limited in what you can change according to the contract terms. Certain types of funeral prepayment may be deemed irrevocable in some states, so it is essential to be aware of the regulations in your region and whether they influence what you can change within your funeral contract. Additionally, although changing the goods and services in the current contract may be possible, changing the cremation or burial would require creating a new contract since it pertains to the final disposition. You can work with your plan provider to determine what you can change within the constraints of the contract or identify what adjustments you can make to meet your needs without making significant changes. 

Sources

“Can I change any of these prepaid funeral services later?” International Cemetery, Cremation & Funeral Association. https://iccfa.com/faq-items/can-i-change-any-of-these-prepaid-funeral-services-later/ 

“What Assets are Exempt for Medicaid Eligibility?” Knox Law. https://www.kmgslaw.com/articles/what-assets-are-exempt-for-medicaid-eligibility 

“10 Questions to Ask Before You Prepay Your Funeral”. Funeral Basics. https://www.funeralbasics.org/10-questions-ask-before-prepay-funeral/ 

According to the National Funeral Directors Association, a preneed contract should contain the following information:

• Identification of the seller (the funeral service provider), purchaser and person for whom the contract is being purchased
• Identification of trustee or insurer (when applicable)
• Rights and obligations of all parties
• Complete description of all goods and services purchased and their specific prices
• How the contract is to be funded
• How substitutions may be made if goods or services are unavailable at the time of need
• Ability to transfer the agreement or funding to another funeral home
• Effect of a change in beneficiaries
• Where and how much of the funds are deposited 
• Tax implications, if any
• Party responsible if additional funds are due at the time of need
• Party to receive any excess funds
• Cancellation and refund policy
• Effect of missed or late payments
• What is included or excluded in any price guarantees*

*Note: Some goods and services may be required at the time of the funeral that are not part of a preneed contract because they cannot be paid in advance. Always ask for clarification about the handling of any items that may still be needed when death occurs.

Additionally, the provider should give the consumer the name and address of the agency that regulates preneed funeral plans in the state and the contact information for the financial institution or insurer that will be managing the prepaid funds. 

The contract should be written in plain language that the average lay person can understand. With that being said, it’s the responsibility of the consumer to make sure they understand the terms of the contract before they sign. According to Joshua Slocum (former Executive Director of the Funeral Consumers Alliance), many of the disputes that arise around preneed contracts occur because the client did not read the entire contract or question the terms and conditions they did not understand.

Sources

“Remembering A Life – A Guide for Your Families”. National Funeral Directors Association. https://nfda.org/resources/remembering-a-life/preplanning-a-funeral/preneed-contracts 

The laws around preneed agreements are written by the states and vary widely from state to state. Thus, legal protections vary a great deal as well. There are no minimum federal standards as to what a preneed contract should include, and the federal government does not require full disclosure of preneed contract terms, explains AARP. These issues may be addressed when the Federal Trade Commission updates its funeral guidance, which many stakeholders hope happens soon. The agency began reviewing the Funeral Rule in early 2020 and requested comments from interested parties, including service providers, consumers and advocacy groups, at that time. The comment period is over as of this writing, but no new rules have been issued as yet.

On a state level, a few states have established “recovery funds” to compensate consumers who are defrauded by a funeral home. These states require that sellers of preneed services pay a per-agreement fee, which is based on the value of the contract. The state deposits the fees in the recovery fund and uses it to defray the consumer’s loss if a seller reneges on the contract and is unable to provide a refund (for example, if the funeral home is in bankruptcy). Sadly, these recovery funds are not the norm. 

Additionally, some states specify that a funeral service provider must provide a refund of some portion of the money paid if the consumer cancels, regardless of the reason why. In Ohio, for example, the funeral home must provide the following: 

• A seven-day “cooling off” period during which the consumer can cancel the contract and receive a 100% refund
• A 90% refund of money paid on a preneed funeral services contract if the consumer changes their mind after seven days
• A 60% refund of the amount paid for a cemetery contract
• 80% of the interest earned on either a preneed cemetery contract or funeral service contract

But, again, each state has its own laws, and most states offer little protection at all. 

Sources 

“The Ultimate Guide to Estate Planning”. AARP. https://www.aarp.org/money/retirement/the-ultimate-guide-to-estate-planning/ 

“Pre-Need Funeral Contracts”. Elder Law Answers. https://attorney.elderlawanswers.com/pre-need-funeral-contracts-3337 

Before you enter into a preneed contract with a funeral service provider, it pays to do some research in advance. Before you even sit down to discuss goods and services, determine whether the service provider is licensed (if licensing is required in your state) and if there are any complaints on file with the state. You can also check with the Better Business Bureau. Reliable businesses generally have an A+ or A rating, which generally means that they have been in business for a while, are financially solvent, and have few customer complaints on file. 

Once you have chosen a funeral service provider that you wish to do business with, ask the following questions before you sign a contract with them. Any provider who is reluctant to discuss these issues with you or offers evasive answers probably does not have your best interests at heart. 

1. If I decide to cancel the contract, can I get all of my money back? If not, what portion of what I pay in advance is refundable? 
2. Can I change the contract if I change my mind about the services I want (for example, cremation versus burial)? 
3. If I change the contract and purchase a less expensive plan, will any price difference be refunded to me? 
4. What happens if I move to another city or state and want to be buried there? Can I transfer the contract to another funeral home? 
5. Are the prices of all items and services I am purchasing guaranteed? If not, what items may change in price and by how much? 
6.  Can any of the items I want to purchase (for example, a casket or urn) be purchased in advance? If so, where will they be stored? 
7. What will happen if items for which I prepaid are no longer available when I die? Will my survivors have to assume any increased costs?
8. What happens if there isn’t enough money to pay for my funeral when I die? 
9. What happens if you sell the company or it goes out of business? 
10. Who do I contact to check on the status of my policy or trust? 

Make sure, too, that the answers you receive from the service provider are accurately described in the contract presented to you. Verbal assurances will not protect you if there is a dispute later on.

Sources

“Preneed Funeral & Burial Contracts – What You Need to Know”. FuneralWise. https://www.funeralwise.com/funeral-cost/prepaid-funeral-contracts/ 

Although preneed funeral plans can be risky investments, there are nevertheless some benefits to paying for your funeral or burial services in advance. For example, knowing that your funeral is arranged and paid for can alleviate concerns over whether your choices around final disposition will be carried out after your death. Additionally, many people find comfort in the knowledge that their surviving loved ones will not be left with the financial burden of paying for their funeral, burial or cremation after they die. 

Another very practical reason to prepay for a funeral is that doing so allows you to lock in the cost of the goods and services you buy (if the prices are guaranteed). However, it’s important to remember that some goods and services associated with your funeral will be purchased from third-party vendors or the state, and those prices may very well increase over time. The only costs the service provider can control are those for the services it provides. 

Lastly, one very good reason to prepay for a funeral is that money placed in a funeral trust is no longer considered an asset in the event you need to qualify for Medicaid (for example, if you need to go to a nursing home). Medicaid has very strict “spend down” rules that allow potential beneficiaries to keep only about $2,000 in total assets if they want to qualify for financial help. And since you will need to be buried or cremated eventually, it makes sense to use a portion of your assets to pay for your funeral expenses if you anticipate needing Medicaid. Keep in mind, though, that these assets must be placed in an irrevocable funeral trust, which means you cannot cancel your preneed contract and get your money back.

Sources

“How Irrevocable Funeral Trusts Help Medicaid Applicants Qualify for Medicaid Long-Term Care”. American Council on Aging. https://www.medicaidplanningassistance.org/irrevocable-funeral-trust/ 

Although rare, fraud or misappropriation of funds is always a possibility when you invest in a preneed funeral plan. For example, in 2009, an Ohio-based funeral services company bilked over 97,000 customers, including consumers, funeral homes, insurers and financial institutions, of over $600 million when it failed to buy insurance policies with the money it held in trust. That case resulted in a civil judgment of nearly $500 million and prison terms for several of the principals involved. 

More recently, in 2019,. the Neptune Society and its parent company, Service Corporation International(SCI), were sued by the State of California for allegedly bilking clients of over $100 million by failing to put 100% of prepaid funds into a state-regulated trust as required by California law. Although the suit did not allege that clients failed to get the services they paid for, it claimed that many customers who cancelled their contracts were denied refunds because the money simply wasn’t there. The lawsuit ended in a stipulated judgement that required SCI to pay retribution to all harmed customers and $23 million in civil penalties. 

Another major risk of preneed plans is that they may not be portable, even if the service provider claims they are. Thus, if you move to a different state or decide to change service providers, you may not be able to get your money back, the Funeral Consumers Alliance warns. This can also be the case if you change your mind about what you want — for example, if instead of going with a full-service burial you decide on direct cremation. instead. In some cases, you may be able to terminate the agreement entirely, but this typically comes with a termination fee, which can be as high as 30%. Furthermore, any price guarantee you were given in the original contract won’t be valid anymore, so the total price may go up. 

Additionally, if your service provider buys an insurance policy with your money, it may not pay a death benefit for one, two or even five years. 

With that being said, many of the risks of preneed contracts can be mitigated if you read the contract carefully and ask questions before you sign. Although some funeral service providers are unscrupulous, most are honest business people who will be happy to answer any questions and go over the contract with you if you ask. 

Sources

“Funeral scam figures get prison sentences in St. Louis federal court”. Insurance News. https://insurancenewsnet.com/oarticle/Funeral-scam-figures-get-prison-sentences-in-St-Louis-federal-court-a-420755 

“Pre-Planning & Pre-Paying”. Funeral Consumers Alliance. https://funerals.org/get-help/pre-planning-advance-directives/ 

“Attorney General Bonta Announces Service Corporation International, Nation’s Largest Funeral Service Provider, to Pay $23 Million Penalty and Consumer Restitution for Consumer Protection Law Violations”. State of California Department of Justice. https://oag.ca.gov/news/press-releases/attorney-general-bonta-announces-service-corporation-international-nation%E2%80%99s 

Unfortunately, there are no federal statutes that specify how funeral service providers handle preneed funds. So where your money goes depends on the laws in your state and, to some extent, on whether you are contracting with a cemetery or funeral home. According to Joshua Slocum, former Executive Director  of the Funeral Consumers Alliance, all states in the U.S. mandate that pre-paid monies be placed in a funeral trust or be used to purchase a life insurance policy with the service provider as beneficiary. However, according to AARP, states vary as to how much of the money you prepay must go into a trust account. Many states require that funeral directors deposit 90%–100 % of preneed funds into a state-regulated trust. However, other states require them to set aside as little as 40%.

Pre-need contracts with cemeteries are even less regulated. For example, more than 30 states only require sellers of cemetery goods and services to put 75% or less of the money you invest in a preneed cemetery plan into a trust according to AARP.   
Additionally, many preneed contracts allow a service provider to withdraw money from prepaid funds if it can prove it purchased goods or services for you. So, for example, if a funeral director orders a casket in advance and stores it in a warehouse, they can withdraw the cost of the casket from the prepaid funds. Sadly, some unscrupulous service providers have abused this contractual loophole by charging consumers far more than the goods they purchased were worth. For example, in 2009, the state of Colorado filed suit against the Neptune Society, a company that sells preneed cremation services. The state accused the company of grossly overcharging customers for goods it provided — for instance, helping itself to $349 for a $13 urn. The company ultimately settled with the state for $630,000.

Sources

“Neptune Society and the Trident Society Settlement”. State of California Department of Justice. https://oag.ca.gov/consumers/neptune-trident-settlement 

“​​California AG Says Funeral Service Provider Made a Killing – At Consumers’ Expense”. Kelley Drye. https://www.kelleydrye.com/viewpoints/blogs/ad-law-access/california-ag-says-funeral-service-provider-made-a-killing-at-consumers-expense 

When you purchase a preneed plan, whether it’s to purchase a burial plot, cremation services or a full-service funeral, you typically have several options: 

• Pay cash up front 
• Enter into an installment plan
• Fund the purchase through an annuity or existing life insurance policy
• Purchase a preneed insurance policy — paid for in cash or through monthly installments

If you choose one of the first three options, your money will be placed in a state-regulated trust and managed by a trustee. Be aware, however, that state laws differ in how much of your money must be deposited into the trust. Additionally, your money will earn interest, but this interest typically will not go to you or your next of kin. Virtually all preneed contracts pay the total amount left in the escrow account at the time of your death to the beneficiary of the trust — the funeral home or service provider with whom you entered into the contract. In some instances, this may mean that the amount the funeral service provider receives is actually more than the cost of the funeral services provided to you.

With that being said, if you terminate a preneed contract and the money is in a trust, you will receive any interest earned. However, in most cases you will need to pay a termination fee in whatever amount is allowed by state law.

If, on the other hand, you fund a preneed contract with an insurance policy, the funeral service provider will buy a policy in an amount equal to the goods and services purchased by you and name itself as the beneficiary. You should know, however, that unless you pay for the policy up front, the total amount of your installment payments will almost always equal or exceed the face value of the policy. Additionally, if you terminate the contract and cash out the policy, you will only receive about half of what you paid into it.

Sources

“Is a Prepaid Funeral Trust Part of an Estate? Understanding Your Options” Wills.com Learning Center. https://learning-center.wills.com/is-prepaid-funeral-trust-part-of-estate/ 

Your family and/or beneficiaries can, in most cases, use life insurance money to pay for your funeral. The beneficiary of a life insurance policy can generally use the funds for any purpose, including to cover the cost of a funeral, burial or cremation.

However, it’s important to note that the process of receiving benefits may take some time. Following the death of the insured person, the beneficiary must file a claim with the insurance company, complete with a certified copy of the death certificate. The insurance company will then review the claim before releasing the funds. Depending on the company and specific circumstances, this process can take a few weeks to several months. So while you certainly can use life insurance money for funeral expenses, it may not be immediately available when the costs are incurred.

A more timely method of using life insurance money for funeral expenses involves assigning the benefit, or a portion of the benefit, directly to a funeral home as payment. For this to be done, your policy must be assignable — review your policy in detail to find out. Further, in some cases a funeral home will partner with an advance funding (or assignment) company, which can remit life insurance funds within 24-48 hours after verifying the policy is in good standing. The company will charge a fee for this service, but it can be a useful option that your funeral home(s) of choice will likely be able to help you with. 

There’s also the option to purchase burial or “final expense” insurance, typically a whole life insurance policy, that pays out a death benefit ranging from $2,000 to $50,000 specifically for funeral or final expenses. Or, you can purchase a preneed funeral plan, another scenario in which a funeral service provider or cemetery is the beneficiary of funds to cover funeral and/or burial costs. However, there are risks associated with preneed plans — such as lack of legal protection for funds or even fraud — and drawbacks to final expense insurance, which can be quite expensive. Before entering into a contract for either of these options, it’s important to read the terms very carefully and clarify any questions before signing (good practice for any contract).

Sources

“Pre-Planning & Pre-Paying”. Funeral Consumers Alliance. https://funerals.org/get-help/pre-planning-advance-directives/ 

“How Does Life Insurance Work?” Investopedia. https://www.investopedia.com/articles/personal-finance/121914/life-insurance-policies-how-payouts-work.asp 

“The Truth About Life Insurance and Funeral Expenses”. Funeral Basics. https://www.funeralbasics.org/truth-life-insurance-funeral-expenses/ 

“How Whole Life Insurance Works” Investopedia. https://www.investopedia.com/terms/w/wholelife.asp 

“Do You Need Burial Insurance?” Forbes. https://www.forbes.com/advisor/life-insurance/burial-insurance/ 

A final expenses insurance policy is whole-life insurance with a small death benefit, usually between $2,000 and $50,000. Also known as burial insurance, funeral insurance, simplified issue whole-life insurance, or modified whole-life insurance, this type of policy is typically marketed to seniors because it is affordable and easy to qualify for. Most require no medical exam and ask only a few health-related questions during the application process, such as whether or not the applicant smokes or is terminally ill. Some insurers ask no medical questions at all. And the purchaser gets to choose the beneficiary — the death benefit isn’t paid to a funeral home. 

The downside of these policies is that they are usually very expensive relative to the amount of the death benefit they pay out. Further, “guaranteed issue” policies (which are available to anyone regardless of health and age) usually have a waiting period during which time the death benefit will only be paid if the person dies an accidental death. (This is usually two years.) However, the insurer will typically refund the premiums paid plus a certain amount of interest (usually 10%–20%) to the beneficiary of the policy if the purchaser dies before the waiting period is complete.

For some individuals, especially those who are older, final expense insurance may be a good way to cover their funeral expenses when they die. The policies are expensive compared to regular whole-life insurance, but for someone who has little savings and cannot qualify for a more affordable policy due to their health status or age, they may make sense. Premiums are usually affordable because coverage amounts are low. For example, in 2021, a 70-year-old woman living in Florida could buy a $5,000 policy from Mutual of Omaha for $35 per month. 

With that being said, policy terms vary, so it’s worth shopping around. Look for a policy that offers monthly premiums that don’t increase as you get older, and a death benefit that stays the same no matter how long the policy is in force. Steer clear of marketing schemes that seem too good to be true because they almost certainly are. Colonial Penn, for example, is famous for its ads that promise premiums of $9.95 a month that will never increase no matter how old you are. But what it doesn’t tell you is that that $9.95 buys one unit of insurance, and the value of that one unit of insurance decreases every year. For example,in 2021, a unit of insurance at age 50 was worth $1,786. But for someone who is 70, that same unit was worth $717. So, even a very modest $5,000 life insurance policy would have  cost a 70-year-old-woman almost $70 per month. 

Be careful, too, that you compare the same kind of insurance as you shop around. Several insurers (for example, New York Life in conjunction with AARP) are currently marketing term life insurance policies to seniors with coverage amounts between $10,000 and $100,000. These policies look very much like final expenses whole-life insurance, but the premiums increase over time and the policy expires at a certain age (80 in the case of New York Life). And while you will typically have the option to convert the policy to a whole-life policy at that time, the premiums will usually be very high. Further,  if you let the policy expire, your beneficiaries will receive nothing when you die no matter how much you paid in. 

To reiterate, final expense insurance can be a smart purchase for seniors who have little in savings and want only enough insurance to pay for their funeral service. But for those who have cash or other assets to pay for the funeral they want, they may not be the best choice.

Sources

“Colonial Penn Life Insurance Review”. QuickQuote. https://www.quickquote.com/colonial-penn-life-insurance-review/ 

“Finding Life Insurance”. New York Life and AARP. https://www.nylaarp.com/Life-Insurance 

The ability to cancel your funeral insurance policy or trust depends on the terms outlined in your agreement. You will find that funeral trusts can be revocable or irrevocable, which affects whether you can cancel the trust and receive a refund. Revocable trusts allow you to request cancellation and a refund, while irrevocable trusts are permanent and do not offer this option. Funeral insurance policies typically have fewer restrictions on cancellations; however, you need to continue paying the premiums for your coverage to remain in effect.

If you choose an irrevocable funeral trust, it will restrict access to the trust’s assets until you have passed away, allowing your beneficiaries to receive these assets only after your death. 

When you set up an irrevocable funeral trust, the assets are owned by the trust and managed by a trustee, which could be a bank, funeral home, or a company specializing in trust management. This arrangement prevents you from canceling the trust, as you do not retain control over the assets. In contrast, with a revocable trust, you maintain control of your assets and can modify or dissolve the contract, leading to cancellation.

It’s important for you to review the documentation associated with your funeral policy or trust to understand the cancellation processes, if applicable, as well as any potential fees or penalties related to your decision. Typically, cancellation fees are more common with revocable trusts than with funeral insurance. If you are considering canceling your funeral insurance policy or trust, it’s advisable to contact your insurance provider or trustee to discuss potential alternatives, understand the financial implications of cancellation, and determine the best course of action based on your needs.

Sources

“Complete Guide to Prepaid Funerals: Plan, Costs, Pros & Cons”. Lincoln Heritage Funeral Advantage. https://www.lhlic.com/consumer-resources/how-pre-paid-funeral-plans-work/#irr 

“The pros and cons of funeral trusts”. Bankrate. https://www.bankrate.com/insurance/life-insurance/funeral-trusts/ 

There are some significant disadvantages associated with payable on death (POD) accounts that you should be aware of. These include the inability to designate alternate beneficiaries, a lack of beneficiary rights, tax implications for beneficiaries,and limitations in account access due to incapacitation. While using a POD account to cover your final expenses may offer advantages, it isn’t always the ideal solution given the associated risks.

One major issue with POD accounts is that you cannot designate alternate beneficiaries if the named beneficiary dies before you. In this case, the funds in your account would be distributed to the beneficiary’s estate through the normal probate process, and you would be unable to name another beneficiary to receive the funds. To avoid this scenario, consider designating multiple beneficiaries on your account.

Another common drawback is the general lack of beneficiary rights while you are still alive. Since it is a POD account, your beneficiary cannot claim any funds until you pass away, even if you decide to release some of the funds before your death. Additionally, the funds from your POD account could be garnished by the courts if the beneficiary is the subject of adverse legal action.

Inheriting a POD account can also come with tax implications. While the value of the account itself isn’t included in taxable income and there are generally no federal inheritance taxes, various state tax laws may apply. You might also encounter estate and capital gains taxes. Moreover, if you have debts, those are typically paid from your estate before any distribution to beneficiaries, although they won’t be obligated to pay unless they are partly responsible for those debts, like if they co-signed a loan with you.

Lastly, it’s important to note that POD accounts cannot be accessed if you become incapacitated. Although the funds in a POD account may be intended to help cover medical costs, your beneficiary will not be able to access any of the funds while you are alive. As an alternative, consider storing funds in a joint bank account or establishing a trust, which might provide easier access in emergencies.

Sources

“Pros and Cons of Payable on Death Accounts”. LegalMatch. https://www.legalmatch.com/law-library/article/pros-and-cons-of-payable-on-death-accounts.html 

“Payable on Death Account Pros and Cons”. Final Expense Guy. https://fexguy.com/payable-on-death-account-pros-and-cons/ 

“Beneficiary Tax Obligations for Payable on Death Accounts”. The Balance. https://www.thebalancemoney.com/consequences-inheriting-pod-account-3505238#toc-estate-taxes 

“Pros and Cons: Payable on Death (POD) Accounts” Smart Asset. https://smartasset.com/estate-planning/payable-on-death 

A payable-on-death (POD) account (also known as a Totten Trust) is an excellent alternative to a preneed funeral plan. Essentially a savings account with a named beneficiary, it is easy to set up and has the added benefit of allowing you to maintain total control of whatever money you set aside until the time of your death. You don’t even need to open a new account if you already have money in savings that you want to use — just ask your bank for the appropriate paperwork, name the person you want to be your beneficiary, and you aree done. 

A Totten Trust is a fully revocable trust, so you can add money to it or take money out just as you would any bank account. Your beneficiary has no rights to the money while you are still alive. They cannot withdraw any funds from the account, nor does the balance count towards their assets (an important consideration if they get sued for any reason or run up debt they cannot pay). Further, you can close the account or change your beneficiary at any time. 

Another benefit of a Totten Trust is that the money in the account is exempt from probate, so your beneficiary will have access to the money shortly after your death. There may be a brief waiting period while the bank collects the necessary documentation (usually just a certified copy of the death certificate and identification for the beneficiary). But the money should be available by the time your funeral is arranged.

Yet another alternative to a preneed funeral plan is to open a joint savings account with a friend or relative. This is not quite as secure as a Totten Trust because the account and all the money in it will be owned by both of you, and the other person can withdraw funds without your knowledge or consent. If you choose this option, make sure the person with whom you open the account is someone you trust.

Sources

“What Is a Totten Trust?” NOLO. https://www.nolo.com/legal-encyclopedia/what-is-totten-trrust.html 

SevenPonds recommends the following resources to help you plan ahead for final expenses.

National Organizations

Funeral Consumers Alliance (FCA) 

A national nonprofit dedicated to helping consumers plan an affordable, meaningful, and dignified funeral, the Funeral Consumers Alliance monitors the funeral industry and advocates on behalf of consumers with industry leaders and government entities.   FCA  affiliates across the U.S. are available to help you and your loved ones make informed choices about final disposition and which options are best for you. Find a local affiliate of the FCA by using this interactive map. You can also contact Sara Williams, FCA Director and former President, at sara@funerals.org.

Federal Trade Commission (FTC)

The Federal Trade Commission is the federal agency tasked with regulating the funeral industry. In 1984, it established the Funeral Rule, a set of standards that outlines how a funeral provider must conduct business with potential clients. Its goal was to ensure that consumers get a fair deal when buying and paying for funeral services. To that end, the agency offers a free online resource as well as information about pre-paying for your or a loved one’s funeral. Additionally, it encourages consumers to report abuses by the industry to ReportFraud.ftc.gov.

National Funeral Directors Association/Remembering A Life

The National Funeral Directors Association (NFDA) is a nonprofit that offers education and resources to approximately 20,000 funeral directors nationwide, providing them with the tools and resources they need to serve families and create meaningful tributes for loved ones. NFDA’s consumer education initiative, Remembering A Life, helps families better understand their choices for funerals and other services, connects them with certified funeral professionals dedicated to ethical service and community engagement, and helps families learn how they can remember loved ones in meaningful ways. Remembering a Life grief resources gently guide family members and friends on their grief journeys. You can contact NFDA online or call 262-789-1880.

Government & Public Benefits 

Department of Veterans Affairs – National Cemetery Administration

The National Cemetery Administration provides comprehensive burial and memorial benefits for eligible veterans, their spouses, and qualifying family members. Resources include a pre-need eligibility application that takes less than 10 minutes to complete, helping families plan with confidence and potentially saving thousands of dollars. Benefits include burial in a VA national cemetery, a government headstone or marker, perpetual care of the gravesite, a United States burial flag, and military funeral honors. The NCA also maintains a library of downloadable information sheets, videos, and flyers to help veterans and their families better understand all available options. Families can contact the National Cemetery Scheduling Office at 800-535-1117.

Social Security Administration – Lump-Sum Death Benefit

The Social Security Administration provides a one-time lump-sum death benefit of $255 to help surviving spouses or eligible children cover immediate final expenses. While the amount has not changed since 1954 and is modest compared to today’s funeral costs, this benefit can help offset small funeral expenses or other immediate needs following a death. Families should be aware that this benefit is separate from ongoing monthly survivor benefits, which are designed to meet regular recurring costs. Information about eligibility and how to apply can be found on the Social Security Administration website.

Final Expense Insurance Leaders

AARP & New York Life

AARP offers a wide range of articles and tools related to advance planning, estate planning, caregiving, and end-of-life decision-making. For many readers, AARP is especially accessible because it explains practical topics in plain language and often addresses both emotional and financial concerns. Its planning guidance can complement the more industry-focused resources by helping readers think through paperwork, family communication, and cost preparation. Its life insurance program with New York Life is considered a definitive leader for seniors aged 50–80 looking for branded, trustworthy simplified-issue policies.

Mutual of Omaha

Mutual of Omaha is consistently ranked as the overall top provider for final expense and burial insurance. They are highly regarded by financial planners for their transparent, competitive pricing and flexible underwriting for seniors. Backed by superior financial strength ratings, their permanent whole-life policies provide fixed premiums that are said to never increase and death benefits that will never decrease.