Beware of Prepaid Funeral Contracts

In an effort to make things easier for their loved ones, people sometimes enter into prepaid funeral contracts. The idea is that you pay for all of your own funeral and burial or cremation expenses in advance. When you pass away, your family notifies the service and the service handles everything.

When you enter into the contract you will have the opportunity to make specific choices with regard to the details of your funeral and burial or cremation. The service is legally compelled to deliver in accordance with the terms of the contract.

A Closer Look

This may sound like a simple solution on the surface. However, there are significant problems with these prepaid funeral contracts. For one thing, there are companies with unscrupulous intentions. These services are required by law to place payments into trusts or insurance policies. This doesn’t always happen. When the assets remain in hand, the people behind the service can abscond when the time is right.

Short of flat-out robbery, prepaid funeral services can take advantage of clients in other ways. Shortchanging would be one of them. For example, you could pay for a casket of a certain quality in advance. A far inferior product could ultimately be delivered. Or, you may pay for a certain number of limousines of a particular size. An entirely different assemblage of vehicles may arrive. Floral arrangements may come up short of the mark, and other shortcuts may be taken.

If you were to enter into a prepaid funeral contract in one area of the country and die elsewhere, you may ultimately receive nothing for your money. The contract could be tied to services provided by specific local entities.

Avoid the Middle Man

When you enter into a prepaid funeral contract you are paying someone to make arrangements that could be made directly. As a result, you are paying more for the actual products and services because the intermediary must make a profit. This is why prepaid funeral services exist. Because of the middle man you are overpaying from the start. You are also surrendering the opportunity to earn interest on the money that you have set aside for your final arrangements.

Viable Alternative

Instead of entering into a prepaid funeral contract, you could place adequate resources into a payable-on-death account. You name a trusted heir as the beneficiary. All of your heirs should be aware of this arrangement. After you pass away, the beneficiary assumes ownership of the resources in the account. Probate is not a factor, so the assets are immediately available to cover your final expenses. If you discuss your preferences with your beneficiary in advance, he or she will carry out your specific wishes when the time comes.

If you go this route there will be no surprises. Everything will go according to plan as you leave behind a turnkey, risk-free postmortem situation.