In this article: We explore the advantages and disadvantages of prepaying a funeral for an aging parent and the things to consider before deciding it is right for you and them.

Is your parent’s health declining? Perhaps you heard that prepaying their funeral can save money. And making arrangements now rather than upon their passing is easier when you aren’t so emotional.

Before prepaying a funeral for an aging parent, there are several important factors to consider to ensure it’s the right decision for you and for them. Here is a look at the advantages and disadvantages of prepaying a funeral and the things to consider to determine if it’s a wise financial decision.

What Are the Advantages of Prepaid Funerals?

• Financial Predictability: Locking in current prices can be a financial advantage, protecting against inflation and rising costs in the future.
• Reduced Burden: It eases the financial and emotional burden on family members at the time of the parent’s passing, as major decisions and expenses have already been handled.
• Personalized Planning: Allows the parent to have a say in their own funeral arrangements, ensuring their wishes are honored.
• Peace of Mind: Provides peace of mind for both the parent and the family, knowing that arrangements are already taken care of.
• Avoiding Rash Decisions: Helps avoid making hasty or emotionally charged decisions during a time of grief.

What Are the Disadvantages of Prepaid Funerals?

• Financial Risk: There’s a risk involved if the funeral home goes out of business or if there are issues with the policy.
• Lack of Flexibility: Prepaid plans can be inflexible, making it difficult to change details if desires or circumstances change over time.
• Cost vs. Benefit Analysis: Depending on the terms, the cost of prepaying might not be significantly different from paying at the time of need, especially considering the time value of money.
• Complex Contracts: Funeral plans can be complex, and it’s important to understand all the terms and conditions to avoid unexpected costs or issues.
• Portability Issues: If the parent moves or wishes to change funeral homes, there might be complications or additional costs involved.

Considerations Before Prepaying a Funeral for an Aging Parent

Taking the time to consider these factors will help ensure that prepaying a funeral is a decision that brings peace of mind and honors your parent’s wishes effectively.

Parent’s Wishes

Understand your parent’s preferences and wishes regarding their funeral. This includes the type of service, burial or cremation, and any specific details they desire.

Financial Implications

Evaluate the financial aspect of prepaying, including the total cost, payment plans, and how it compares to other options like savings or insurance. Also, consider the potential impact on their estate and any public assistance they may receive.

Funeral Home Reputation and Stability

Research the reputation and financial stability of the funeral home. You want to ensure they are well-established and likely to be in business for many years to come.

Contract Details

Understand every detail of the contract. This includes services covered, items excluded, price guarantees, and what happens if prices increase.

Cancellation and Refund Policy

Know the policy for cancellations and refunds. This is crucial if circumstances change, such as if your parent moves to a different area.

Transferability

Check if the plan is transferable to other funeral homes, especially if there’s a chance your parent might relocate.

Legal and Regulatory Aspects

Understand the legal and regulatory aspects of prepaying a funeral in your region. Regulations can vary, affecting how funds are held and protected.

Inflation Protection

Ensure the plan accounts for inflation. Some plans guarantee prices at the time of purchase, while others might not.

Payment Options and Security of Funds

Consider how payments are made and how the funds are secured. In some cases, funds are held in a trust or in a life insurance policy.

Impact on Public Assistance

If your parent is receiving or may in the future receive public assistance, such as Medicaid, understand how a prepaid funeral plan might affect their eligibility.

Compare Alternatives

Weigh other options like funeral insurance, a dedicated savings account, or a payable-on-death account at a bank.

Involve Family Members

Discuss with other family members to ensure everyone is on the same page and to avoid conflicts later.

Seek Professional Advice

Consider consulting with a financial advisor or an attorney to understand the financial and legal implications thoroughly.

Emotional Considerations

Reflect on the emotional impact of making such arrangements. It can be a difficult topic, but it’s important to address it sensitively and openly.

Should You Prepay a Funeral for an Aging Parent? Readers Weigh In

Would it be both emotionally and financially easier to prepay the funeral? Both for you and them? Readers who have faced this difficult decision weigh in.

Hold Your Money

This is just my opinion, but it’s scary to pre-pay a large sum of money on anything in this day and time, with so many people and businesses going bankrupt and out of business. This could happen to funeral homes, too. I would save the money for the day when it’s needed. It might be safe to go ahead and buy a plot and place a headstone. Once these are paid for, they will belong to you. I would think there would be no chance of losing them to a bankrupt business.
JoyceAnn

Earn Interest on Saved Money

If you have the money now to prepay the funeral expenses, put it into a bank account and let it earn interest. Then, you can pay for the funeral expenses when the time comes and help defray any other expenses that may arise.

Also, we have friends who work for a funeral home, and they said prepaying is a type of insurance. The funeral home doesn’t get any more than the prepaid amount at the time of the burial. So, if you prepay at today’s cost, that is what they receive when they provide service, and the rest goes to the insurance company. You could always ask the funeral home how much their rates have gone up annually and make sure that the interest percentage you earn matches the percentage of increase.
Lisa C. in Portland, Oregon

When Nursing Home Is a Future Possibility

I think prepaid funerals or burial contracts are a great thing. Funeral costs do go up over time, like anything else. My mother was able to pick everything she wanted to have, using a life insurance policy to cover the prepaid funeral.

We found ourselves in the unfortunate position of not being able to take care of her anymore, and she is now in a nursing home. Medicaid only allows up to so much in assets. This includes life insurance. But a burial contract is allowed besides that Medicaid limit. I believe you would be doing your mother and yourself a big favor by making an arrangement.
Dee in RI

Prepaid Funerals Allow Decision Making With a Clear Mind

Yes! We started the process when my grandmother began declining but never followed through with it. I wish we had. The prices were higher than originally quoted, we had less time to get the money together, and we had to do it all in a short amount of time under great duress. I would strongly recommend prepaid funerals to anyone who can afford it.
Dani R.

From an Industry Insider: Options in Prepaid Funerals

I used to work at a funeral home and believe that prepaid funerals are a good idea. When the inevitable happens, it is better to set everything exactly how your loved one wants it rather than scrambling at the last second to get everything done.

For example, when my grandmother passed away, she already had a contract in place, and because she had a very large family, everything was planned down to the last detail. She even planned to have all ten of her children wear nametags so that visitors would know who was who (my mother and my aunt are identical twins and the nametags helped!). Half the valley arrived to give their condolences, and because my grandmother planned everything in advance, it all went off without a hitch and we were able to grieve properly for her.

There are options when it comes to arranging a funeral contract. You could either set up a revocable account or an irrevocable account. With a revocable, you have the option of canceling your contract and getting most of your money back if you change your mind. With an irrevocable contract, you cannot cancel your contract, but you may transfer it to another funeral home if you wish to do so.

What you should do is first find out about the funeral home. It should be a place that is reputable, financially stable, and you feel comfortable with. The funeral home that my family chose was the same one I used to work for. My Grandmother chose it mainly because the funeral directors were known for doing an excellent job. They were not only very professional in handling the business aspect of a funeral, but they were also very kind and nurturing through the grieving process. They were the perfect choice for her.

Make sure you really need all the services that they offer. For example, if you choose to cremate your loved one, then you do not have to have them embalmed. Be prepared to discuss a contract when you visit the funeral home.

If you do give money to the funeral home, it will be placed in escrow and invested for your benefit. They are also legally obligated to tell you who the agent is and give you an annual statement.

Here is a checklist from the Attorney General’s Office:

Before purchasing:

• Get the prices of the goods and services. A copy of the general price list must be provided. You can get it in person or ask for the prices on the phone.
• Get the separate price lists for caskets, vaults, and cremation urns. These lists must also be provided.
• Get a written statement of the goods and services you select. This is important for comparison shopping and holding the funeral home accountable.
• If you choose to take care of some services yourself, check to see if there are charges for these services in the fees. Ask the funeral director to explain the services included in the funeral home’s fees and insist the fee be reduced if you make any of the arrangements yourself.
• It is not always clear what goods or services are guaranteed or how excess funds will be handled. Be sure that any contract you sign clearly specifies the responsibilities of the funeral home.
• Ask the funeral director to describe the investment risk and rate of return of every option. Funds placed in escrow for prepaid funeral contracts should be managed as carefully as any other investment you make.
• Contact the escrow agents directly to ask about their management policies.

After purchasing:

• Give a trusted relative, friend, lawyer or doctor a copy of the contract.
• If you go to a nursing home or hospital, give them a copy of the contract and the name of the funeral home.

I hope that helps in your decision for your loved one.
JR

Recommended Way to “Spend Down” Assets

I went through this with my mother, too. She invested in a prepaid funeral. The funeral parlor put the money into a “funeral CD,” which earned interest that was put back into the CD. My mother actually lived another 11 years after this was done. We still had to pay an additional $1,500 because the cost had increased over time. The plan we had didn’t “lock in” the price, only the initial price and services.

The benefit of it, though, is that if your parent has to go into a nursing home, you have to “spend down” their cash. Most people don’t have enough money to pay for a nursing home with their own money. This means that they will have to first use up all of their funds, except for a small amount and then apply for Medicaid. Prepaid funerals are a recommended way of spending their assets. You will have to account for all expenditures of their money. (See also: What Is a Miller Trust and How Does It Help Medicaid Eligibility?)

This isn’t an easy subject, but you are right to situate things while you are able to make decisions together.
Charlen C.

• Funerals: To Pre-Plan or Not To Pre-Plan
• Helping an Elderly Parent When Their Mate Dies: Financial Chores
• End-of-Life Planning Everyone Needs To Do
• Financial Paperwork and Information Your Elderly Parents Should Have on Hand

Reviewed October 2024