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The Heritage Law Center, LLC Blog

Massachusetts Prepaid Funeral Contract Considerations

POSTED ON: February 17, 2014

Prepaid burial contracts can be a good way to take some of the challenges out of a very challenging situation. Prepaid funeral contracts make things easier for loved ones, and can also have some estate planning benefits as well. However, you must be careful when selecting the provider of these services and have your eyes open throughout the process to avoid being burned.

The idea is simple: with a prepaid funeral contract you pay for all of your own funeral and burial or cremation expenses in advance by executing an irrevocable contract with your chosen funeral provider. When you pass away, your family notifies the provider and they handle everything.

When you enter into the contract you will have the opportunity to make specific choices with regard to the details of your funeral and burial or cremation. After contract execution, the service provider is legally compelled to deliver in accordance with the terms of the contract.

A Closer Look
This may sound like a no-brainer, but problems can arise with these prepaid funeral contracts. Service providers are required by law to place payments into trusts or insurance policies for safe-keeping. This doesn’t always happen however, and an unscrupulous company could try to leave you in the lurch. Be sure to ask about their accounting practices prior to agreeing to a contract.

Occasionally funeral providers may even try to deliver products inferior to those you chose while creating your plan. Be sure to have a detailed accounting of exactly what you are paying for and what you expect to receive. It is a good idea to let loved ones know about your plans so they can make sure your wishes are respected.
Something else to consider is that with a prepaid funeral contract you are essentially paying someone to make arrangements that could be made by your loved ones directly. As a result, you end up paying more for the actual products and services because the intermediary must make a profit.

MassHealth Benefits
One estate planning benefit for those on or interested in becoming eligible for MassHealth for long-term care is that prepaid funeral contracts are not considered countable assets. That is, because the contract for services is irrevocable, MassHealth does not consider the funds available to you and will not make you count them as part of your asset allowance. This can make prepaid funeral contract a great option for those who need to ‘spend down’ assets to qualify for long-term care benefits.

Other Options
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, he or she will carry out your specific wishes when the time comes. 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.