Confronted with a difficult but relevant question
Grieving someone near to us tends to cause us to reflect on our own future. Most people meticulously plan for significant life milestones — such as purchasing a home, financing college, or retiring — but not many plan for what occurs once they’re no longer with us.
If you’re in your 50s and thinking about paying for your funeral upfront, you’re not alone. It’s a savvy decision that can ease financial and emotional stress on the ones who care for you. But before you jump into it, it’s good to think about the pros and cons.
By the National Funeral Directors Association, the average cost of a funeral with viewing and burial in 2023 was $8,300. That cost could very well rise in future years, so many are preplanning and prepaying.
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The benefits of prepaying your funeral
1. You lock in today’s rates
As with everything, funeral costs rise over time — usually 3% to 5% per year, experts say. If a funeral in the current year is $10,000, it will be $16,000 in a decade. By paying up front, you protect your family against future price hikes.
Phillip Reed, an estate attorney, explains that prepaying “saves your family from rising costs and doesn’t leave them with a large bill weeks after your passing.”
2. You save your family from probate problems
When you pass away, your possessions — even those that you’ve left behind in your will — must go through probate, a government process that will take weeks. Unfortunately, funerals cannot wait that long.
Prepaid funeral plans vary. They don’t go through probate, and therefore the funds are immediately available. Renee Fry, CEO of Gentreo Inc., states, “People have the impression that beneficiaries can use inheritance money to pay for a funeral, but that’s usually not possible immediately. Prepaying guarantees those upfront costs are paid.”
3. You save loved ones from difficult choices
Having your funeral prepaid also avoids emotional anguish. Families will get into fights about burial versus cremation or what kind of service to have. Having these determined today — and paid for — gives your family peace of mind during your time of bereavement.
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The pitfalls to watch out for
1. Your plans or location may change
One of the greatest disadvantages of prepaid funerals is flexibility. You might move to another state or realise you’d prefer the service there instead, and it can be hard or even impossible to transfer the plan.
Some of the prepaid plans cannot be transferred, so you can lose money if you make a move. It can also complicate travel for relatives who don’t remain in the area anymore.
2. The funeral home could go out of business
In the event that the funeral home goes out of business, your money could be at risk. Reed recommends that your funds be placed in a trust or insurance product rather than the funeral home account itself. Such funds are typically safe, although state laws vary — so it’s better to seek an expert.
3. It could affect medicaid eligibility
Prepaid funeral arrangements are sometimes an issue with Medicaid, especially if they are not established correctly. Reed explains prepaid plans, to a certain extent, are usually excluded from Medicaid’s asset qualifications if only the plans are established with certain guidelines in place. Talking with a financial or estate planning advisor can prevent costly mistakes.
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So, should you prepay?
There’s no one-size-fits-all answer. Prepaying a funeral can protect your loved ones from financial and emotional stress — and it can be a smart move if done correctly. However, it’s not without risks.
If you’re unsure, another option is to use a life insurance policy with a named beneficiary. That payout can cover funeral costs, though it may take a few weeks to arrive.
In the end, paying for your funeral upfront is a peace of mind issue — yours and your family’s. Consider discussing it with an estate planning attorney or financial advisor before you do it. They can help you ensure that your plan is secure, economical, and flexible enough to meet your needs.
