PRE-ARRANGING A FUNERAL:
SOME THOUGHTS
Many people are interested
in making funeral
arrangements well in advance
of the need. Any paperwork
completed ahead of time will
help simplify things when
death occurs. Taking charge
of your own planning insures
your wishes are carried out
and spares loved ones from
the emotionally draining
task of doing so later.
Preplanning allows you to
make advance financial
arrangements. Finally,
preplanning can be a
valuable tool if
Medicaid
planning for long-term care
becomes a necessity.
Details such as pallbearers,
memorial donations to
certain organizations and
church officials to conduct
the service can all be
tentatively arranged and
then changed, if necessary,
when finalizing actual
arrangements. It is easier
to go over information
already on file looking for
possible changes than to
start from the beginning.
Also, many churches have
formal or informal systems
for keeping your funeral
wishes on file – talk to
your pastor, priest or other
clergy.
When meeting with a licensed
funeral director, you might
want to ask for prices on
everything to get an idea of
what kind of cost will be
involved. When making
pre-arrangements, the
funeral home representative
will give you the different
preneed options offered by
the funeral home. Those
options will be discussed
further below.
You may be interested only
in pre-arranging the funeral
service and/or type of
funeral and may not be
interested in making
specific selections of
merchandise such as caskets,
vaults, etc. If you select
merchandise and actually
make specific funeral
arrangements, you will have
an idea of how much money to
set aside for the funeral.
In either case the funeral
home will be able to give
you a copy of the
arrangements decided upon.
Remember to take into
considerations that
inflation may cause the
price to increase with time.
There are a number of common
ways to insure a funeral is
properly paid for in
advance.
PRENEED FUNERAL CONTRACTS
Preneed contracts are being
marketed extensively and
offer the opportunity for a
person to fully consider his
or her needs and wishes and
control the cost and nature
of funeral services desired.
The contracts vary in terms
of coverage and should, like
any other purchase involving
a substantial sum of money,
be reviewed carefully before
execution. We will be happy
to work with you in that
part of your overall estate
planning process.
Preneed funeral contracts
are governed by Article 13D
of Chapter 90 of the General
Statutes of NC and are under
the jurisdiction of the NC
Board of Funeral Service.
NC law requires that any
seller of contracts for
preneed funeral arrangements
must apply for and obtain a
license from the NC Board of
Funeral Service.
Discussions concerning
arrangements and/or
pre-arrangements may only be
handled by a person licensed
by the State Board of
Funeral Service, insuring
that a trained professional
provide you with correct
information and advice.
Do not contract with any
seller who does not have
such a license. With most
well-known and established
funeral service providers,
this should not be a
problem.
PRE-FINANCING ARRANGEMENTS
Two words to become familiar
with in the area of
pre-financing a funeral are
revocable and irrevocable.
A revocable contract may be
canceled at any time by the
purchaser. An irrevocable
contract cannot be canceled
but its benefits can be
transferred to any provider
of your choice at any time
prior to need.
In order to qualify for
medical assistance
(Medicaid) an individual is
allowed to shelter funds set
aside from payment of
funeral expenses as long as
the funds are put aside in
an irrevocable contract.
Many of the preneed
contracts are set aside as
irrevocable for this
purpose. See The
Medicaid Planning Process.
TYPES OF CONTRACTS
In North Carolina there are
primarily two different ways
to pre-finance or pre-pay
for a funeral which should
cover all costs incidental
to a funeral service.
I. PRENEED TRUST
AGREEMENTS. In such an
arrangement, money to pay
for the funeral is placed in
a bank, trust company,
savings bank, or savings and
loan association in North
Carolina. The licensed
funeral home which acts as
trustee for the funds may
withdraw the funds put in
trust once it has performed
the preneed contract.
Some things to consider with
this contract include:
A. Taxes on the interest
earned — No matter what type
of account your money goes
into (savings, CD, etc.)
income taxes must be paid on
the interest earned. The
funeral home acting as
trustee for the account
should advise you as to the
amount of earnings on the
account and should provide
you with reporting
information.
B. Earnings on the account —
The interest earned on the
account will be added to the
trust, therefore, allowing
it to grow until the funds
are needed to actually pay
for the funeral. Hopefully
the earnings on the account
will cause the trust to grow
to keep up with inflation.
Some funeral homes offer
inflation-proof contracts
which guarantee the
purchaser that the
pre-arranged funeral will be
handled no matter what the
cost at the time of death.
C. Fees — If you, as
purchaser, agree and the
contract is funded by a
trust deposit, the funeral
home may retain up to 10% of
the payments as
administrative expenses
provided; however, it gives
credit for the amount
retained at the time of
need. If the trust is
transferred to another
funeral home, the original
funeral home may retain up
to 10% of the trust amount
as administrative expenses
and does not have to give
credit for the retained
amount.
II. INSURED PRENEED
ARRANGEMENTS. Insurance
policies can be used as a
means to finance preneed
contracts in North
Carolina. The proceeds of a
specially designed policy,
for a specified amount of
money, pay the preneed
contract amount at the time
of need.
Because there are many
different kinds of insurance
options available, you
should look over the
policies and plans
carefully. For example, in
addition to trust-funded
inflation-proof preneed
contracts, you will also
find inflation-proof
insurance-funded contracts.
All preneed contracts,
whether trust funded or
insurance funded, must be
recorded with the North
Carolina Board of Funeral
Service. A filing fee of
$18.00 must accompany each
contract. After filing and
within thirty days, the
recording of the contract is
acknowledged in writing to
you, as purchaser, by the
Board.
