Death is the inevitable end of life and most of us do not spend much time thinking about it or the cost. According to the National Funeral Directors Association the average funeral can exceed $10,000 when you include cemetery costs. How we memorialize our loved ones is dictated by religious, cultural and societal practices, which may increase the cost dramatically.
Three Options for Funeral Planning
Most funeral practices are regulated at the state level with recent efforts to standardize practices through the national association. There are several ways to prepare for funeral costs.
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Final Expense Insurance is a low-cost whole life insurance with face values in the amounts of $5—25,000. An advantage of these policies is the ease at which they can be obtained. The disadvantage is the proceeds do not necessarily have to be used for funeral expenses.
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Pre-need Funeral Contracts are basically insurance policies. The money is placed into a trust, as regulated by most states. Clients should receive information on the policies over the years.
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Funeral Trusts allow individuals to pre-pay funeral services so the money will be available when needed. Again, most states require the money to be put into a master trust, appropriately invested with clients knowing the name of the institution where it is held and receiving periodic reports.
Funeral Rule Legislation Protects Relatives
One of the most significant pieces of consumer protection legislation is the Funeral Rule, enforced by the Federal Trade Commission. This rule makes it possible for consumers to purchase only those goods and services they want, rather than an entire package of goods and services offered by the funeral home. Funeral homes must provide a general price list that includes all items and services the home offers and the cost of each one. Generally, this rule provides:
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A person has the right to choose the funeral goods and services they want
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The funeral provider must give a person a general price list that states what is wanted in writing
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If state or local law requires individuals to buy any particular good or service, it must be stated with references to the law
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The funeral director cannot refuse to handle a casket or urn purchased somewhere else
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Funeral directors that provide cremations must make alternative containers available to consumers
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Individuals cannot be charged for embalming if not authorized
This legislation was passed to counteract many abusive practices that existed within the industry.
In addition to the cost of funerals, the biggest assistance living individuals can give to their loved ones is to leave their wishes on what services they would like for themselves. These wishes should be stated in writing and placed where they will be found. It is recommended it not be in the will, which may not be discovered until after the funeral. It is a great gift to the family to know they are providing the type of service their loved one desired.
Any information is not a complete summary or statement of all available data necessary for making an investment decision. Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James. You should discuss any legal matters with the appropriate professional. C14-007746