A Prepaid Funeral, Preplanning a Funeral

Why Preplan?

Funeral prearrangements alleviate the burden on family members to make difficult decisions during a stressful time when they are not best prepared to do so, and provide peace of mind. Many people think of funeral planning as part of their estate planning. Benefits of preplanning include:

• Allows individuals the opportunity to make personal and specific selections for the funeral service that most closely meets their needs;
• Spares loved ones from having to second-guess the wishes of the deceased at the time of need;
• Allows for time to research funeral homes, burial options, and financial considerations;
• Provides an option to set aside funds for final expenses, relieving family members of an unexpected financial burden;
• Medicaid/SSI recipients may set aside money to fund the service of their choice before their funds are exhausted down to necessary eligibility levels.

Why Prepay for Funeral? How do Prepaid Funerals Work?

On top of funeral preplanning, many people also choose a prepaid funeral setup. They either pay the full amount up front or arrange a payment plan with the funeral home. The benefits of a prepaid funeral include:

• Placing the cost of the funeral (at today's prices) in an investment vehicle, so that the interest earned will keep pace with inflation to cover the cost of the funeral (at future prices) when the death occurs;
• Prevents life insurance policies from being depleted at the time of a loved one's death;
• Allows individuals to consider options while they are better prepared to make sound, fiscally responsible decisions;
• Spares loved ones the unexpected cost of a funeral during a stressful time;
• Medicaid/SSI applicants and recipients may set aside funds for their funeral expenses in an irrevocable trust, which is considered an excludable asset.

New York State Laws Protect Consumers

More than any other state, consumers in New York with a prepaid funeral have their funds protected by the strongest preneed laws in the nation. It is important to remember that the funds in a preneed account belong to the purchaser, who may change their selection of funeral homes or funeral arrangements at any time.

 The law requires that:

• The purchaser shall receive a general price list, preneed agreement and an itemized statement of goods and services selected;
• The funeral director must deposit the funds in a financial institution or trust in a U.S. government-backed investment within 10 business days;
• In New York State, a funeral director cannot charge a consumer any fee for prearranging a funeral;
• The purchaser shall be notified of the institution where the deposit was made within 30 business days of the initial deposit;
• Each year, the purchaser shall be notified by written statement of all account activity and interest earned;
• All monies paid and interest earned on a revocable agreement shall be returned, upon written request, to the purchaser.

If A Funeral Home Closes

A frequent question that consumers ask is "What happens if the funeral home closes?"

Fortunately, preneed funds are forwarded to an interest-bearing account with a separate financial institution in the purchaser's name. The purchaser remains in control of those funds at all times.

In the event of a funeral home closing, all accountholders must be notified in writing within 30 days. They may then choose to transfer the funds in their preneed account to another funeral home or, if it is a revocable agreement, they may request a refund of their deposits plus all interest earned.

The New York State Health Department Bureau of Funeral Directing regulates funeral service and closely monitors this process.

Special Considerations for Medicaid/SSI Applicants and Recipients

All citizens – regardless of income – are entitled to and deserving of both a proper funeral service and a burial with dignity and respect. In fact, federal and state laws support this guiding principle in a number of ways.

First, any person applying for Medicaid/SSI can set aside funds for the sole purpose of paying their funeral/burial expenses as part of the spend-down process to Medicaid/SSI eligibility. The funeral/burial funds set aside will not be counted as part of the individual's financial resources.

Second, New York State law requires that 100% of these funeral/burial funds be placed in an irrevocable trust account, making certain that they will be available when needed and used for no other purpose than what they were intended. A trust which is titled 'irrevocable' means that any refund or withdrawal, for any purpose, will and must legally be refused by the funeral director and/or funeral trust or financial institution.

An applicant/recipient of Medicaid/SSI may also set aside funds in irrevocable funeral trust accounts for the following immediate family members:

• Spouse;
• Children;
• Step-Children;
• Siblings;
• Parents; and the spouses of these individuals.

Please note that when the original purchaser passes away, the beneficiary (family member) becomes the new purchaser and taxpayer.

If any money is left over in the irrevocable trust after the funeral and burial charges have been paid, it will go to the county where the decedent resided.

Finally, the individual has the right to use any funeral home they choose. The funeral home selection may be changed at any time, for any reason.

A Medicaid/SSI eligible individual must first notify his or her caseworker that funds will be set aside to pay their funeral/burial expenses.

The Prearrangement Conference

Schedule a time to meet with the funeral director to explore options. He/she will review the funeral home's General Price List. There are many types of special, personalized services that can be discussed at this time, including music, flowers, memorial donations, the type of service based on personal preferences, and much more.

Once the details have been finalized, the funeral director will prepare a preneed agreement and a fully itemized statement for the consumer to review and sign if satisfied.

If prefunding as well, there may be options for payment. Many people choose to prepay in full; some will arrange payment plans with the funeral director. Either way, the funds will be forwarded within 10 days to an interest-bearing, government backed account in a bank or trust, such as PrePlan, the funeral trust program of the New York State Funeral Directors Association.

Within 30 days, the consumer should receive a deposit acknowledgement in writing indicating where the funds have been placed.

As part of the preplanning process, a consumer may also choose to designate any person over the age of 18 (whether related or not) to make sure their funeral arrangements are carried out as intended. While in no way financially responsible, this individual would have sole legal authority to act on behalf of a decedent strictly on funeral and burial matters. The funeral director can provide additional information, along with the necessary documents to designate an agent.