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If I Buy a Preneed Funeral Plan, Where Does My Money Go?
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 […]
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
