December 2001

 

Pre-Need Funeral Plans
Jamie H. Thompson, thompsonja@missouri.edu

Many Missourians are planning their funeral in advance. While in the pre-planning process, one option that should be considered is to prepay some or all of the expenses involved in your funeral. A “pre-need” funeral plan is an agreement in which a seller agrees to provide funeral services and merchandise at the time of the buyer’s death—the costs may be paid in installments or in one lump sum. (Missouri’s Attorney General’s Office)

If you are considering prepaying for funeral goods and services, it's important to consider these issues before putting down any money:

• What are you are paying for? Are you buying only merchandise, like a casket and vault, or are you purchasing funeral services as well?
• What happens to the money you've prepaid?
• What happens to the interest income on money that is prepaid and put into a trust account?
• Are you protected if the firm you dealt with goes out of business?
• Can you cancel the contract and get a full refund if you change your mind?
• What happens if you move to a different area or die while away from home? Some prepaid funeral plans can be transferred, but often at an added cost.

Know the plan. Be sure to review the plan thoroughly—it should describe exactly what you will receive. Under Missouri law, the pre-need funeral contract must specify in detail the funeral merchandise and services to be provided.

Know who is selling the plan and who is honoring it. In the State of Missouri, pre-need burial plans may be sold directly by funeral homes or by other companies that have arranged to have a funeral home in your area service the plan. Be sure to see the contract between the seller and the funeral home.

Remember, Missouri law gives you the right to cancel a pre-need funeral plan at any time unless at the time of sale you choose to give up that right. All pre-need burial plans are subject to a 30-day right to cancel. With the right to cancel, if you should default on payments, you are entitled to recover any amount you paid into the plan, minus the amount the seller is allowed to keep—the first 20% of the purchase price—usually without interest depending on the contract.

Know where your money goes. Under Missouri law, all payments made on a pre-need burial plan, minus the amount the seller is entitled to keep, must go into a pre-need trust. Read your burial plan closely—the plan must identify the pre-need trust into which your payments will be deposited. The name and the address of the trustee must be in the plan.

It is a very good idea to periodically request a written statement of all deposits into the trust on your behalf. By having the statement, not only are you assured that your payments are going into the trust, it is also a good way to track your balance in the trust.

Read your contract! Does you contract have a provision in the event that the seller and/or funeral home goes out of business? This is important to know. Also, what happens if you move out of the area or even out of the state? Or, what if you are on vacation in Florida and you die—what happens then. Discuss these things before finalizing your contract.

It is important to share your funeral plans with your family. If your family isn't aware that you've made plans, your wishes may not be carried out. Be sure to tell your family that you've prepaid the funeral costs, they could end up paying for the same arrangements. Let them know where the documents are filed—all your important papers!

Source: Adapted from the Missouri Attorney General’s Office (www.ago.state.mo.us/preneed.htm) and Federal Trade Commission (www.ftc.gov/bcp/conline/pubs/services/funeral.htm)