That is the question…..I saw it again this week. A sweet lady mistakenly thought that the only way she could pre-fund her funeral is to make small monthly payments, over a several year period, and pay interest for the “privilege” of setting aside her own money! WRONG! By using a Funeral Trust, you can make small monthly payments, over the number of years you choose, and RECEIVE interest, much like a savings account. You do NOT have to pay interest to a third party for the “privilege” of saving your OWN money for your OWN final arrangements!
Funeral homes are happy to take your money and take your interest payments. That is one way that that future prices can be covered with current costs. Sometimes families want to “lock in” the cost, but don’t consider what they are paying to lock that in – sometimes more than the value of the services/merchandise, depending on the payment plan. In most instances, you are then locked in to that particular funeral home – which is exactly what the funeral home wants. What if the funeral home closes? changes ownership? files bankruptcy? They have your money, and it won’t be refunded. Also, if you change your mind about the plans you want, even if you take a step down financially (i.e. cremation instead of traditional burial) – the money you have paid in will most likely be totally consumed by the funeral home by “assisting” you with making other choices.
Funeral homes are our friends. We need them at the time of death. They are licensed and regulated concerning death and burial. Funeral homes have learned that another way to increase profits is by pre-needing funeral arrangements. They are not financial advisors, they are not Medicaid planners, they are not able to assist you with the “big picture” of end-of-life planning, however, they are accepting a significant sum of your money, over which you lose control, and these payments may or may not fit in to your overall financial plan.
Pre-planning your final arrangements is very important. Funding those plans is important. Making those plans fit in with your total end-of-life financial planning is crucial. This financial transaction should not take place in isolation from your other plans.
Think carefully about using a professional for your end-of-life planning. Do your homework. Ask questions. Make sure that this crucial planning piece fits well in the “big picture” of your planning.