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Death Care Law
Consumers Pre-planning Your Funeral or Burial Pre-planning Your Funeral or Burial The Internet is a good place to start when planning for your funeral or burial.  A Google search will find thousands of funeral planning websites, most of which are sponsored by the death care industry.  If you want to start with advice from sources independent of the death care industry, we would suggest the following websites: FTC Website: Funeral Consumers Alliance: planning We also address preplanning issues from time to time on our compliance blog such as the “Fork in the Road: personalization vs religious rituals”.  To find more on our blog on such issues, use the search tool and input “preplanning” and “churches”. The Funeral Consumers Alliance also has a listing of local chapters that can provide price surveys and additional information: The best single piece of preplanning advice we can offer is to discuss your preferences with those family members that are most likely to assume the responsibility of your funeral.  Involve them with the planning process, and anticipate that your preferences could change over time.  Also consider involving your priest, minister or rabbi in your discussions.  We also recommend that clergy consider books such as Paul Irion’s “The Funeral: Vestige or Value?” and Lucy Bregman’s “Beyond Silence & Denial”. Pre-paying, Prearrangement or Preneed For many individuals, planning for their funeral and burial is not complete until they have taken care of the expected costs.  The transition from preplanning to preneed often begins with the purchase of a grave space or a niche at the cemetery where family  has been buried.  The next decision is whether to purchase a preneed contract for a funeral or cremation arrangement.  Some of the websites included on this page advise against purchasing preneed funeral contracts or preneed cemetery contracts.  Some of the criticism is well-founded, but some of the criticism is based on misunderstandings and misconceptions about preneed.  It is crucial to understand that preneed is not a savings plan or final expense fund.  Preneed is the purchase of goods and services which will not be delivered until your death.  Some cemetery preneed purchases can be delivered in advance of your death, but for the most part, the prearrangement described in the preneed contract will not be delivered for several years.  The average age of a preneed contract can vary from funeral home to funeral home, but it is common for a preneed contract to be outstanding from 8 to 12 years.  A client recently serviced one preneed contract that had been outstanding for 50 years.  The Securities Exchange Commission had a crucial role in defining how preneed is currently regulated.  The preneed transaction was first developed in the late 1950’s, and there was confusion about whether a purchaser was making an investment or purchasing goods and services.  Pioneer preneed programs sought guidance from the SEC, and over the course of two decades, the SEC routinely took the position the preneed contract was a purchase of goods and services.  Other Federal agencies (such as the Office of Thrift Supervision) took similar positions on related issues.  As a result, the preneed transaction is viewed as local in nature, and therefore, to be regulated at the state level.  Consequently, there are more than 50 state laws governing the preneed transaction (some states have different laws for funeral homes versus cemeteries).  This makes it very difficult to provide generalized advice to consumers about preneed. On our compliance blog, we try to explain the good and the bad of preneed.  There are good reasons for purchasing preneed, but we recommend that you do not purchase preneed until you are certain about the funeral home you want to use.  If you change your mind about that funeral home, your refund may be less than what you paid.   But, of the thousands of preneed contracts we administer, a very small percentage cancels each year.     Preneed Funding Options Generally, there are only three forms of preneed funding: trusts, depository accounts and insurance products.  There is plenty of debate within the death care industry about which is best, but a recent survey by the National Funeral Directors Association indicated that trust funding is the leading option for the funeral industry.  This popularity can be attributed to state association sponsored master trusts.  These state association programs allow small funeral homes to pool their preneed funds in the nature of a cooperative so that they can achieve the economies of scale needed to diversify investments and reduce the costs.  Trust funding also provides the funeral home more flexibility when consumers default on installment payments.  A funeral director may choose to overlook late payments where an insurance company would lapse the policy. Trusts will also be the main funding option for cemeteries because certain merchandise products (markers and monuments) can be delivered before death. Insurance is often the preferred funding option for larger funeral homes in states that require 100% trusting.  The larger funeral homes typically have proactive preneed programs, and commissions paid on insurance will subsidize the costs of the program.  Depository accounts are frequently used by funeral homes in smaller towns.  Many banks do not have trust operations and the funeral home may not sell enough preneed to warrant the costs of maintaining an insurance license.       Insurance (Advantages and Disadvantages) The insurance sold to fund preneed contracts represents a specialty policy that a small number of insurance companies offer.  These companies provide marketing, forms and administration to their funeral home clients.  On our blog post “Preneed Contract Forms: Worth the paper they’re written on?” we discuss a compliance advantage of the insurance funded preneed contract.  Another advantage of insurance funding is the portability of the policy.  The policy can be assigned to another funeral home if you move to a new town.  But, one disadvantage of insurance funding is that if you have to cancel the preneed contract the policy’s cash surrender value may be less than what would be refunded from a trust funded contract.  Another disadvantage is the cost of the insurance when the policy has to be paid with installments.  We discuss this in the blog post: Another factor in the cremation trend: preneed insurance premiums. Final Expense Insurance A growing number of insurance companies are marketing final expense insurance.  These policies are typically marketed independently of funeral homes, and are intended to also cover burial costs. In contrast to insurance through a funeral home, there are usually no price guarantees made with the sale of the final expense policy.  The final expense policy has the same disadvantages of low cash surrender values and high installment premium costs. Final Expense Trust Final expense trusts are gaining favor with estate planning attorneys and elder law care attorneys.  The final expense trust provides immediate funds for the costs of funeral and burial.  With life insurance, your family may have to wait weeks or months for the funding needed for funeral and burial expenses.  A final expense trust can be funded when it is convenient for your budget.  There are no required monthly payments, and it does not require you to commit to specific funeral arrangements or a funeral home.  A trust offers more protection than a pay on death account.  But, the disadvantage with a trust is their costs when a corporate trustee administers the account.  If the trustee cannot pool investments, the trust’s expenses can exceed its income.  Cemeteries The cemetery industry is not covered by the FTC’s Funeral Rule, and therefore, is not required to provide a general price list.  Consequently, many cemeteries do not have price lists.  We advise our cemetery clients to not only establish price lists, but to also publish their price lists.  Before purchasing property from a cemetery, we recommend that you request the following: a general price list, the cemetery’s rules and regulations, the current endowed care fund report and the sales contract form.  It is important to understand that cemeteries generally do not refund payments made towards burial spaces.  This has been a frustrating issue for consumer advocates that we addressed in Consumer Advocacy: Pulling Punches. It is also important that cemeteries charge separately for the opening and closing services required for a burial.  The costs of these services, and the costs of a marker and a burial vault, have risen dramatically in recent years.  If a cemetery does not offer preneed, these costs can only be paid when the burial is needed.  On the blog, we discuss how the lack of a preneed option by cemeteries is contributing to the decision to cremate.  The Preneed Haves and Have Nots Cemetery Marker Sales and the "Deferred Delivery Expense" The death care operator's contributions to the cremation trend: immediate payment
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Preneed Resource Company 5350 W. 94th Terr, Suite 202 Prairie Village, KS 66207 Tel: 913-378-9922 Tel: 800-449-0030 Fax: 913-378-9924