Some of the common situations seniors and their loved ones encounter when considering funerals and burials lead to many questions. Any of these scenarios could be facing you and your family:
- George is getting older in years, and his few heirs don’t have much money. Upon his death, how will they pay for his funeral before an estate checking account is set up to pay bills?
- Barry is in hospice at home and his wife is elderly. How can his funeral plans be pre-arranged so that Barry’s wife can be freed up to focus on her family and friends at the time of his passing?
- Elena and her family are working on making her eligible for Medicaid. How can her assets be used to plan for her funeral while she still has access to her funds?
- Sally has family across the country and she does not want them to worry about the cost of the funeral she would like to have. How can she choose what she wants and pay for it ahead of time?
The answer to all these questions may be to set up a Pre-Need Agreement. You will need to investigate this option in your state as the information in this article is based on New York State regulations.
Pre-Need Agreements allow you to decide on the details of your funeral and pay for them now. This ensures that your wishes will be clearly understood by your loved ones and that decisions which might normally be rushed, emotionally charged, or dictated by finances of family members can be made and paid for in advance.
There are two types of Pre-Need Agreements:
- Revocable Customer Agreement: a trust which can be canceled at any time prior to a funeral, and the purchaser’s initial payment plus accrued interest will be returned.
- Irrevocable/Medicaid Customer Agreement: a funeral trust which is used for applicants for, or recipients of, Supplemental Security Income (SSI) or Medicaid. Because it cannot be revoked, the government is assured that the funds are inaccessible except for their intended purpose. The choice of the funeral parlor, however, can be changed.
Because the interest earned by the trust is used to cover increasing costs, funeral parlors are able to guarantee the price presented to you or your family, regardless of the time elapsed between the date of purchase and the funeral.
The agreement can also include “Cash Advances” — funds held to cover additional costs, for services not provided by the funeral parlor. Because the charges cannot be guaranteed, the money held by the trust (plus interest on the cash) may exceed, or may not fully cover these expenses. This may include the services of clergy or costs related to the cemetery.
The cost of a headstone may also be eligible for “Cash Advance.” Depending on what company you employ, the monument may need to be pre-paid for separately.
As Daily Money Managers who want to support families and executors when a loved one passes away, we encourage everyone to think through their funeral wishes, the necessary steps to implement those wishes, and how to support those who will be left behind, even while they are grieving.