Friday, January 11, 2008

Estate Planning: About Paying for a Funeral

Estate planning includes funerals? Yes. Medicare exempts pre-paid funeral plans from the money the federal government can grab. If nothing else that ought to make them attractive to the public.

Can I just put all that in a Will? No. The Will sees probate after the death and not before.

Does a lawyer set up a funeral trust? No, you can do that through a funeral director. See FUNERAL PLANNING on the Indiana Funeral Director Association's website.

Reading Funeral costs can be headache for families unprepared in the Muncie Star-Press brought all this to mind.

The struggles of a local family trying to bury their loved one should serve as a cautionary tale when planning a funeral, funeral experts say.

Betty Randolph, 68, died Friday, Dec. 21. Her daughter, Shirley Morris, and sons Ronnie and Jerry Randolph, made arrangements for their mother's burial at Garden View Funeral Home.


Because of the Christmas holiday, Garden View could not immediately verify whether Randolph's insurance policies would cover her burial costs. The funeral home allowed the family to have a visitation and funeral service for Randolph, but when the policies failed to cover those costs, Morris and her brothers didn't have the money to pay for her burial.

"We thought she had a $5,000 insurance policy, but it was no good because she had let it lapse," Morris said. "Another she took out in 2006 will only pay about $1,000 because she had to be alive two years to get full benefits."

The Star-Press article includes information on pre-need planning. The article nails the most important non-financial reason for pre-planning a funeral:
The other option for families is to plan ahead, says Curtis Rostad, executive director of the Indiana Funeral Directors Association.

Rostad encourages people to pre-pay for their funeral arrangements -- an option that alleviates the cost and stress of decision-making for family members after the person is deceased.

(The article also mentions that Indiana's township trustees provide money for funerals of low income people.)

Indiana law has two kinds of pre-paid funeral trusts. One funded by cash and the other by an insurance policy. I have an article dealing more specifically with the law here. I think (but have no evidence to back me up here) most people are using insurance policies to fund the funeral trust. For an example of a pre-arrangement program see MASTERCHOICE® FUNERAL TRUST.

Setting up a pre-paid funeral trust means going to the funeral home and selecting the sort of funeral you want. Before going to the funeral home, you should read the Federal Trade Commission's Funerals: A Consumer Guide. The FTC's Funeral Home Rule requires a funeral home to display a price list that includes all goods and services the funeral home will provide to the buyer. The funeral trust funds whatever the buyer selects.

I know no one likes to consider Wills and estate planning or funerals, but not doing can leave your survivors making the choices and may leave them in the same position as the Randolph family.