Can I Pay for a Funeral in Advance?

A fellow caregiver asked...

Can I pay for a funeral in advance?

Expert Answer

Barbara Repa, a senior editor, is an attorney, a journalist specializing in aging issues, and the author of Your Rights in the Workplace (Nolo), now in its 10th edition.

You can, but it may not be a good idea.

Although there are a number of legal controls on how the funeral industry can handle and invest funds marked for future services, there are still reported abuses of mismanaged and stolen "preneed" or "prearrangement" accounts. And it's suspected that many more problems go unreported by survivors too grief stricken or embarrassed to complain about them.

If you're interested in prepaying for final arrangements, be sure the contract you sign has safeguards against some common pitfalls:

  • No business-closure contingency. When mortuaries go out of business or change hands, some people who have prepaid have been left without funds and without recourse.

  • Location-specific payment. Some individuals who have prepaid for services in one state and then have moved to a new locale have found that their funds are nonrefundable, or that there is a hefty penalty for withdrawing or transferring them.

  • Inflation. Like most consumer goods and services, funeral costs generally increase over time, which can mean that survivors are left to cover the gap between the prepaid amount and the substantially inflated current costs.

As a simple alternative to entering a prepayment commitment, consider setting up a Totten trust -- a trust or savings account earmarked as payment for your final arrangements. Most banks or savings institutions will do this for a slight, one-time charge. During your lifetime, you can easily add to, transfer, or withdraw from the account as you see fit.