Is it illegal to prepay for ones cremations & funeral?
As my husband and I get older I have contacted the funeral home in the town where we live The Chapel of Memories. I had asked about doing a payment plan now to get our funerals & cremations taken care of on a monthly plan but we were told it is illegal to do monthly payment plans and it must be paid up front fully. Is this correct, they said it would be put into trust the money we gave them for our funerals. So if we do that who gets all the interest from this trust account I would certainly want my interest if possible
Expert Answer
Your question is interesting. I have never heard of it being illegal to prepay for funeral expenses, even if you're only paying for part of it.
There are some things you can do - call a couple of other funeral homes in your area (or the next town over if the one you mentioned is the only one in town) and ask if a person who wants to prepay for their services can pay a portion and then add to it as they are able. You can also go to your bank (or call) and ask about opening a burial account. It is a law that prepaid funeral funds must be deposited in an account in your name and NOT in the funeral home's account, whether it's in a trust or deposited in a bank. A bank does not require any specific amount to be deposited into a burial account and you can add money to it as you wish. You'll need to get together with the funeral home to determine the amount that will be needed to cover the type of services you and your husband desire. (Incidentally, you'll need separate accounts for you and your husband.)
As for the interest, you can ask to withdraw it; however I would not advise it. Many funeral homes give a guarantee when the services are prepaid in full. How that works is that the funeral home guarantees that if the interest is left in, it is used to offset the increase in costs from the time you make the arrangements and deposit the money to the time that you die and the services are performed. If the interest accrues faster than inflation raises the prices, any difference is refunded to your next of kin. However, if the interest does not accrue enough to cover the increase in the funeral costs from inflation, the funeral home guarantees that they will honor your arrangements for the amount in your account without asking for more money. This guarantee obviously only is valid when the interest in left in to help offset any increase in the funeral home's costs due to inflation.
Also I will be glad to contact the funeral home you mentioned to get clarification on this if you left me know what state it is in because there are several funeral homes with that name in different states.