You need to discuss your funeral plans with your family. If you choose to pre-fund your funeral, you need to review the various options that are available for funding in advance. By considering these options ahead of time, you can greatly reduce the financial burden that could be placed on your family in the event of your untimely demise.
Types of Pre-funding Options
Pre-funding funeral options are available in forms such as trusts, insurance, payable-on-death accounts, certificates of deposit, and private trust funds. In the case of trusts, this type of pre-funding can be used in accordance with the laws in your state. Depending on the type of trust, pre-funding may be managed by the funeral home itself, or a bank or state association.
Funeral trusts may or may not keep pace with inflation for a specified period of time. The proceeds of a trust are typically taxable to the purchaser. If you are not sure about what safeguards your trust has, discuss your state’s trust funding statutes with a funeral provider.
Again, pre-funding funeral options also include insurance. In this case, whole life insurance or preneed insurance products may be used for funeral pre-funding. In this instance, a consumer buys a specialized policy that features a death benefit which increases over time. Preneed insurance may be paid by a one-time cash payment with no further premiums due over the contract term. The policy growth and payout are not taxable to the buyer.
Payable-on-death or POD accounts are established in some states for funerals where death is imminent. Usually a POD account is held jointly by the funeral home and purchaser. Upon the purchaser’s death, the account instantly goes to the funeral provider. A POD account does not guarantee the complete payment of a funeral. The family or the decedent’s estate is responsible for any shortage.
If you have any questions about pre-funding funeral options, you need to consult with your funeral provider during the pre-planning stage. That is the best way to make sure that any financial considerations will be fully addressed before a funeral takes place. You can connect with them on Facebook for more information!
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