Can I pre pay funeral expenses with my mother's life insurance policy?

Bev asked...

Can I pre pay funeral expenses with my mother's life insurance policy? If so, how do I pre pay for her funeral?

Expert Answer

Steve Weisman hosts the nationally syndicated radio show A Touch of Grey, heard on more than 50 stations, including WABC in New York City and KRLA in Los Angeles. He is a practicing lawyer specializing in estate planning and is admitted to practice before the United States Supreme Court. He's a public speaker and commentator who has appeared on many radio and television shows throughout the country, and he's the legal editor of Talkers magazine, the preeminent trade publication of talk radio. His latest book is The Truth About Avoiding Scams.

You cannot assign the ownership of your mother's life insurance policy in return for a prepaid funeral contract with a funeral home, but you do have some other options that may help you pay for her final expenses.

The funeral home can't become the owner of your mother's life insurance policy, nor may it be the beneficiary of the policy. The law limits the ownership of life insurance to people who have an "insurable interest" in the life of the deceased. These laws go back hundreds of years to when people would be able to purchase a life insurance policy on the life of someone who was unrelated to them and then kill the insured person in order to obtain the insurance proceeds.

However, you do have two viable choices that will permit you to use the life insurance policy to cover the cost of your mother's future funeral costs.

The first option is merely to consider the money that will be derived from the death benefit to be for the sole purpose of paying for her funeral expenses. You can do this without having anything more than an understanding that you, or whomever else is named as beneficiary of the policy, will use the money for this purpose. The second choice is to have a lawyer prepare a simple Funeral Trust that can be the beneficiary of the life insurance policy. Upon your mother's death, the proceeds of the policy will be paid to the trust which designates that the money be used to pay for her funeral expenses.