What Are the Benefits of Prepaying for My Funeral?

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/