When planning your final affairs, everyone should consider the prepayment of their funeral. This has become even more important with the increasing frequency of life ending nursing home admissions.
Unfortunately, life ending nursing home admissions are often lengthy and expensive. Currently, the average cost of a nursing home stay is in excess of $8,000 per month.
These nursing home admissions often result in a person’s assets being fully consumed in advance of their death. If this occurs, no money will remain for the payment of your funeral, in which event your loved ones will be burdened with the cost of your funeral. Needless to say, this could cause extreme financial hardship.
On the other hand, if you pre-pay your funeral, and then incur large nursing home expenses, the result will simply be that your assets will be consumed earlier. In turn, this will result in the Medicaid program beginning to pay your nursing home expenses at a point which is correspondingly earlier.
Many people have great concern that their funeral prepayment will not be maintained securely. However, pre-payment is actually quite secure in light of how it is accomplished.
Generally speaking, funeral pre-payment is accomplished by one of two methods. Both are undertaken through your preferred funeral provider.
The first method of prepayment is through the purchase of what is known as a final expense insurance policy. This insurance policy is issued by a well-established insurance company with whom your funeral provider has an affiliation. It will pay your funeral provider immediately upon your death. Pre-payment in this fashion is therefore quite secure.
A nice feature of a final expense insurance policy is that it is also transferrable. Therefore, if you move, or have a change in preference as to your funeral provider, your final expense insurance policy can be transferred to any other funeral provider.
The second method of prepayment is by payment directly to your funeral provider. Your funeral provider is then required to hold your pre-payment in an established trust account.
While most funeral providers are quite reputable, this option causes some people to have concern since your funeral provider is typically the authorized signer on this trust account. In theory, your funeral provider could improperly access this trust account in advance of your death.
Another drawback with respect to this second method of prepayment is that it is not typically transferrable to another funeral provider.
Lastly, an important question to ask your funeral provider is whether he will guarantee that your pre-payment will fully cover the ultimate cost of your funeral, or whether additional monies could be due upon your death. Some funeral providers will provide this full payment guarantee, while others will not.
Coyle is an attorney with the Buzgon Davis Law Offices, 525 South Eighth Street, Lebanon, Pennsylvania. His column appears the first Tuesday of each month.
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