Preplanning

“Do people actually come in and plan their funerals ahead of time?” That’s a question I am often asked in one form or another and because funeral planning is such a private matter, people don’t know that others are planning ahead also.

Preplanning of funeral services is just one of many changes I have seen during my years as a funeral director. This spring I was given a forty year certificate by the Iowa funeral Directors Association at our annual convention in Des Moines. Over those forty years, the greatest change has come in the number of people who are planning ahead for themselves or for someone close to them. The National Funeral Directors Association estimates one in three funerals is planned in advance to some degree. The percentage is increasing each year.

Why do people plan ahead? Each person has a different reason, but my experience tells me it is for one of three general reasons:

1) People like the peace of mind knowing the events immediately following their death are planned for and not left to chance. When something is planned in advance, the chances are very good it will be done according to the plan. This is especially true of funeral plans. Families welcome knowing what the

person had in mind for their funeral. A family will seldom, if ever, change those plans. The last wishes are honored.

Special circumstances may result in a few necessary changes, but most often the original plan is followed.

2) When funeral plans are written down, the family benefits. A lady told me just this week, “This is the greatest gift I could ever give my family.” Why did she feel so strongly about planning her own funeral? She had just planned a funeral for someone very close to her and she had to do it alone. Because of the unexpectedness of the death, other family members were not up to the task. She did it lovingly, but some advance planning would have helped.

3) The expenses can be paid at today’s cost. As with almost everything, funeral services will probably cost more in the future than they do today. The average funeral can be paid for with today’s dollars. Since the service will not be needed for several years in the future, sometimes many years, this is a real advantage when resources are limited. People considering Medicade Title 19 should always think of funeral pre planning. It is wise to plan for the inevitable.

As was said at the beginning, there are many reasons people plan for funerals in advance but the above three are the most common reasons.

In our last issue of Home & Family I wrote about why people come to us to plan funeral services ahead of time. My experience indicates there are three basic reasons: 1. Peace of mind and security of knowing the ceremony events of your death are planned. 2. Your family knows what you prefer. 3. The expenses can be paid at today’s cost.

Today I want to provide information about the actual creation of a funeral plan and/or trust.

There are two elements of a funeral plan. One is information: biographical plus funeral details. The second is optional, but important, and that is a financial agreement. Let’s look at the information first.

Information is of two types. One type of information needed is biographical information. We often ask for this information ahead of time, so that it can be checked by the family when it is needed. This provides better accuracy. It is not uncommon to have information on file which the family may have forgotten or did not know. Some of this information is needed for the death certificate, social security, the Veterans Administration and others. The other type of information provides details for the funeral service and cemetery. This information tells your family your thoughts and preferences. It is very helpful to your family and also to us. Information given ahead of time is extremely crucial when there is no close family to be relied upon. Some people are satisfied to leave their information with us, so we have it on hand for when it is needed.

The other part of a funeral plan is a financial agreement which involves a contract with the funeral home and a deposit of funds. As a consumer protection, the funeral home must deposit these funds with an outside financial institution. Your funds cannot remain co-mingled with the funds of the funeral home. I was one of several funeral directors who lobbied this law through the Iowa legislature and am pleased to see the resulting protection it has brought to Iowa consumers. It needs to be noted, that a deposit of funds directly with a financial institution and not accompanied by a funeral provider agreement does not meet the Iowa code for medical assistance eligibility. The funds must be first deposited with the funeral home which will provide the eventual service, and the funeral home then deposits the funds. These two criteria, the information and the financial agreement, are called a funeral trust or funeral prefunded contract. The holder of the funds may be either a bank or insurance company. Payments are possible. Some agreements which have an insurance company as the trust holder, allow for monthly or quarterly payments.

There are a couple of important notes which should be made about funeral trusts. A trust can be revocable or irrevocable. A revocable trust can be rescinded at any time. Under some circumstances this trust may not provide the protection you want because it can be altered by others after the time of death. The vast majority of funeral trusts are irrevocable. When funds are placed in an irrevocable trust they remain there until the time of death. They cannot be removed by anyone during the lifetime of the person who is covered by the trust, including the funeral home, family and all others. Medicaid eligibility regulations require a funeral trust to be irrevocable.

There is one note of importance: transferability. Trusts are payable to the funeral home which provides the service. If a family makes a trust through us and then moves to another part of the country, the funds do not stay here with us at the time of death, they are payable to the funeral firm which provides the service in the new location. There is usually a small charge payable to the original funeral firm for the accounting expenses of maintaining the trust account.

Funeral trust contracts may be either guaranteed or non-guaranteed. With a guaranteed contract (amount paid, plus the accrued interest earned) the funeral home guarantees to provide the professional services, the casket and vault at any future date. The category of expenses we call cash advances are not guaranteed. Cash advances items, such as funeral notices, honorariums, and death certificates, are expenses we pay for the family to others. They are payments to others, so we are unable to control their cost. A non-guaranteed trust is when an individual or family wants to simply deposits funds on interest with us with the final decisions made at the time of death. Some people prefer to provide the funds, but want their family to decide the final details, using the initial amount plus interest earned. Funds are not transferred out of the policy until death. This also works well.

There is one more way to provide funding for a funeral contract: it is called an irrevocable assignment on an existing insurance policy. This is accomplished by having us work with your insurance company in creating a document that will pay all or part of the funeral expenses. If the value of the policy is less than expenses, all the proceeds are paid to the funeral home. If the policy has a value greater than the expected expenses, the amount assigned to the funeral home is “as its interest may appear.” This means your family approves the final billing and this billing is then sent to the insurance company for payment. When an irrevocable assignment is in effect on a policy, it takes precedence over beneficiary claims. An assignment is a very good way to provide funding for a funeral plan. This is true especially where present funds are limited, but there are ample funds through a death benefit of an insurance policy. It is also possible to transfer ownership of a smaller life insurance policy to the funeral home to meet the same objective. We do not encourage this, but it does meet Medical assistance regulations.