Why Pre-Fund a Funeral

There are several good reasons to pre-fund your funeral:

  • Ensure that money will be available — pre-funding ensures that an amount you consider appropriate will be earmarked for the funeral.
  • Financial management — prefunding with funeral insurance can help you manage the value of your assets.  For example, funeral insurance is not counted as a personal asset in determining eligibility for assistance from social service programs, such as Medicaid.

Most states have laws requiring that providers set aside a certain % of prepayments received in a trust account.  This pertains to goods and services that are promised for future delivery.  However, the trusting requirement can vary from 30% to 100% and the provider manages the trust.  You should be cautious about making prepayments directly to your provider if the purchased items are not immediately delivered, especially if the trusting laws in your state are lax.

There are pre-funding options that allow you to maintain greater control.  Funeral trusts and funeral insurance are methods of pre-funding a funeral that involve making payments to third-parties (i.e., a bank or an insurance company) who will manage your funds until the time of the funeral.  The third party will pay the providers when the pre-arranged services and merchandise are delivered.  Generally, you have the right to change service providers, at any time, under either of these funding vehicles.