How to Pay

How can you pay for the funeral?

If you are making arrangements before your death, you can set aside funds to cover most of your funeral costs.

If written instructions were left by someone who is already deceased and money was set aside specifically for the payment of a funeral, most states will require the person in charge of making funeral arrangements to comply with those wishes.  However, if the person did not prepay for the funeral, the person in charge should determine who will pay and how much money is available before a commitment is made.    If other arrangements have not been made, the estate of the deceased is legally obligated to pay for the costs of the funeral.

It’s important for the funeral agent to make sure the estate has the funds necessary to pay for any arrangements made.  The funeral agent should not pay expenses out of his or her own pocket assuming that they will be reimbursed by the estate; the chances are that they won’t be.  It’s also important for the funeral agent or other close family member to find out about all of the benefits to which the deceased may be entitled.  Don’t leave money sitting on the table that can help pay for the funeral.

Several ways a funeral may be funded are listed below:

• Pre-need Contract – Setting One Up
• Pre-need Contract – After Death
• Funeral Insurance Policy – Purchasing One
• Funeral Insurance Policy – After Death
• Funeral Savings Account
• Social Security Death Benefits
• Special Veteran’s Benefits
• Workman’s Compensation
• Automobile Insurance
• Union or Professional Organization Payment
• Employer Payment
• Public Assistance

Pre-need (Trust) Contract – Setting One Up

You can prearrange your funeral and enter into a contract with a funeral home and/or cemetery to prepay some or most of the expenses involved.  In addition, in some states pre-need agreements can be sold by third party sellers.

If you choose a pre-need contract, you decide which funeral and/or cemetery services you would like, sign binding contracts for these services and pay a set amount into a trust administered by the funeral home or cemetery.  You should be aware that in some state contracts with cemeteries or cemetery-related services may not be protected by the same laws as those contracts with funeral homes.

No all costs can be prepaid.  Although you can prepay for your burial plot, services such as opening and closing a grave are usually not part of a pre-need contract and will have to be paid for when used.  Be sure to ask for a separate write-up of these costs so your family will know what to expect.  Otherwise, they will be totally surprised when they are asked to pay what might be a large invoice on the day of your funeral.

Please note that each state has its own statutes related to the prepayment of funeral goods and services and the protection of those funds.  Some states have excellent protection; others offer little or none.  Some states require the funeral home or cemetery to place a percentage of the money you’ve paid into a state-regulated trust or to buy a life insurance policy with the death benefits assigned to the funeral home or cemetery.  Since the laws vary, the area is open to unscrupulous sellers.  So be sure you very carefully  investigate the person or company from whom you are considering buying pre-need goods or services.

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If you’re thinking of choosing a pre-need, prepaid plan:

• Ask for a guaranteed, inflation-proof price.  This will protect you and your family from a potential price increase.  With a non-guaranteed plan, your survivors may have to make up the price difference out of your estate or out of their own pockets.  Funeral directors are becoming more reluctant to sell this type of plan because it doesn’t protect them against inflation or other increases in costs that may occur between the time you actually sign a contract and die.
• Ask about any cancellation clause.  If you live in a state that does permit cancellation, make sure your contract contains a cancellation clause in case you change your mind later.  If you cancel this contract, most of the money you paid will be refunded to you.  However, there may be a revocation fee, with the amount kept by the funeral establishment varying by state.  In California, for example, the fee can be no more than 10% of the total amount that was paid in.  In Missouri, the seller is allowed to keep the first 20%.
• Ask whether your family or designated agent can change your plan after your death and get back the money you prepaid.
• Ask whether your payments will ever exceed your benefit.
• Ask whether the seller is bonded.
• Ask whether the funds in your pre-need trust will increase in value over time, where the money is being invested and who the trustees are.  Every year, you will probably receive a statement of earnings which will have to be reported on your income tax forms.  Ask what will happen to any remaining trust fund earnings after the total you owe has been paid and get that answer in writing.
• Ask whether you must pay the total amount up front or if you can pay for your pre-need contract over time.
• Ask what happens to the money you’ve prepaid.
• Ask who keeps the interest your money earns.  In most states, the funeral home keeps it!
• If you’re paying into a trust, make sure your plan identifies that trust as well as the name and address of the trustee.
• As whether you can transfer your funeral arrangements to another funeral home or if the cemetery will buy back your plot if you move away from the area or change your mind.  Can you cancel the contract in total?
• Find out what happens to your money if the funeral home or cemetery goes out of business or is sold.  If the funeral home goes out of business, there may be no one around to honor the agreement you signed.
• Find out whether you live in one of the states that offers solid protection for the consumer.  In many states, these plans are not well protected by law and your family may find that money is owend on your “prepaid” plan or what you requested will not be delivered.
• You need to understand exactly what you are paying for.  Are you buying things like your casket or are you buying funeral services as well?
• Thank about whether you’ll be going on Medicaid.  The Social Security Administration considers the “asset” of a prepaid funeral as excluded from being counted as a spendable asset (when determining Medicaid eligibility) if the funds are set aside for the funeral are placed in an irrevocable trust.

Be sure that your family knows about your plans and any contracts you’ve signed or fees you’ve paid.  Otherwise, they may not carry out your wishes or they may end up inadvertently paying for them a second time.

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Pre-Need Contract – After Death

If the decedent prepaid for funeral arrangements, the funeral agent can immediately call a funeral provider and make arrangements based on the wishes of the decedent.  Be aware that, in some instances, a pre-need contract does not include the cost of a cemetery plot or a niche for cremated ashes.  When reviewing the pre-paid plan with the funeral provider, verify what costs are included and what items will cost extra.  Before committing to extra fees, coordinate the payment of any additional fees with the executor of the estate.    If you think the deceased had a pre-need contract but you can’t locate it, contact local funeral homes.  One of them may have a copy of the contract.

Funeral Insurance Policy – Purchasing One

You can buy a funeral insurance policy through the funeral home you choose; similar to a POD (pay on death) account, the funeral home becomes your beneficiary.  You can select your casket, cemetery plot and other funeral goods.  In some cases, the funeral home will be willing to guarantee the price; if so, your relatives will not have to pay any more than is stated in the contract, regardless of whether the prices rise.  However, if the prices drop or the interest is such that there money left after the expenses are paid, the funeral home gets to keep the balance.

If you buy funeral insurance, ask what happens if you decide to cancel the policy.

Funeral Insurance Policy – After Death

The decedent may have purchased insurance for the purpose of paying for the funeral.   The insurance company will pay the insurance proceeds directly to the named funeral home after they receive the notification of death.

Funeral Savings Account

The decedent may have opened a savings account which named the funeral home as the beneficiary.

Social Security Death Benefits

If the decedent paid into Social Security, a one-time death benefit of $255 may be available.  A family member or designated agent can file for this benefit after death and, in some cases, it will be paid by SSA toward burial expenses. www.ssa.gov/pubs/10084.html

Special Veteran’s Benefits

If the deceased was a veteran or the spouse or minor child of a veteran, there may be benefits available to offset some of the service and cemetery costs.  And, if the decedent was a military veteran and wanted to be buried in a private cemetery, the decedent’s estate may be eligible for up to $600 towards burial costs (up to $2,000 if the death was service related).  In addition, a veteran may be entitled to military funeral honors, a burial flag, a presidential memorial certificate and a plot allowance.  Finally, it is possible to arrange a burial at sea performed on a U.S. Naval vessel; however, no family is allowed.

Workman’s Compensation

If the decedent died from injury or disease related to their job, the decedent’s heirs may receive funds, including money towards funeral expenses.  In addition, the deceased’s dependents may receive a benefit payment.

Automobile Insurance

If the death is a result of an automobile accident, funeral expenses may be covered by the insurance held by the deceased.  State laws vary so be sure to check.

Union or Professional Organization Payment

If the decedent was a member a union or other professional organization, member death benefits may be available.

Employer Payment

Some employers, including the government, may offer death benefits.

Public Assistance

If the decedent was receiving public assistance at the time of death, the local county Department of Social Services Burial Assistance may be able to provide funds to cover some of the expenses.  If the decedent was indigent at the time of death, the county in which he or she resided may still provide a small sum of money to help cover the costs of burial.  That compensation may be as low as $250.

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