When a loved one dies, it’s a very emotional time for their family and friends. A prepaid burial contract will allow you to make the decisions you want for your funeral which would help alleviate that extra stress that would be on your family for planning your funeral. These contracts can also have some estate planning benefits as well.
With a prepaid funeral contract, you pay for all of your own funeral and burial or cremation expenses in advance by executing either a revocable or irrevocable contract with your chosen funeral provider. When you pass away, your family notifies the service provider who is legally compelled to deliver in accordance with the terms of the contract.
Keep in mind, that there have been instances of unscrupulous companies not putting your payments into trusts, traditional life insurance policies or annuities, or separate bank accounts for safe-keeping as required by law, or delivering inferior products to the ones you chose in your plan. It’s important to make sure that you’re dealing with a licensed funeral director in good standing at www.mass.gov/dpl. Let loved ones know who you’ve chosen as your funeral provider and what you specifically paid for so they can make sure your wishes are respected. Be sure to ask the companies these questions:
- What happens to the money you’ve prepaid?
- What happens to any interest income on money that is prepaid?
- What happens if the company goes out of business?
- Can you cancel the contract and get a full refund if you change your mind?
- What happens if you move to a different area or die while away from home? Can the plan be transferred? Will there be an added cost?
Also, compare prices between funeral providers and make sure the price is locked in and additional money won’t be required at the time of death.
Revocable vs. Irrevocable Prepaid Funeral Contract
- Revocable prepaid funeral contracts allow the principal plus interest minus any bank fees to be returned to you or transferred to another funeral home at any time by sending written notice to the funeral home.
- Irrevocable prepaid funeral contracts don’t allow for the funds to be returned to you after ten days from the date of signing the contract, however, the money is no longer considered a countable asset if you’re on or interested in becoming eligible for MassHealth for long-term care. This can make a prepaid funeral contract a great option for those who need to “spend down” assets to qualify for MassHealth’s long-term care benefits.
Another Option
If MassHealth planning is not a concern, then you might want to consider setting up a payable-on-death account instead of entering into a prepaid funeral contract. In this scenario, you name a trusted heir as the account beneficiary. After you pass away, the beneficiary assumes ownership of the resources in the account, which also avoid probate. If you discuss your preferences with your beneficiary in advance, they’ll carry out your specific wishes when the time comes. You can also make all of the arrangements in advance with a funeral provider without prepaying, so that the provider has the information on file. If using this strategy, it may be a good idea to make several of your heirs aware of this arrangement. This can be a good option for those looking to leave behind a turnkey, risk-free postmortem plan.
Contact us at mkarr@maheritagelawcenter.com or 617.299.6976 to set up a free meeting to talk through all of your estate planning needs so you can be prepared for the future and protect your loved ones.
