What You Should Know About Prepaid Funeral Plans

How Much Are Funeral Costs in the United States?

Funerals rank among the most expensive purchases many consumers will ever make. As of 2023, the median cost of a traditional funeral, with casket and burial, was $8,300.

The average cost varies depending on where you live as well. Data from 2024 shows that average funeral costs (for burial or cremation) are highest in the following seven states: Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota. Any "extras," like flowers, death notices, acknowledgment cards, and limousines, can bring the total to well over $10,000.

The process of organizing a funeral or celebration of life for someone else is an overwhelming and emotional one. Many people consider a funeral or burial a reflection of their feelings for their deceased family member or friend. As a result, they may tend to "overspend" on these services.

Planning Your Own Services

Today, an increasing number of people are planning their own funerals or memorial services. They may also designate their funeral preferences in detail and sometimes even pay for funeral ceremony in advance.

In part, they may pursue a prepaid, or "pre-need," funeral plan to help relieve their family members of the financial burden. They also do this to offer them some peace of mind. With plans already in place, their loved ones can forgo certain decisions amid their grief, when they're likely also overwhelmed with other pressing tasks.

Prepayment for funeral services can serve as an effective Medicaid planning strategy, too. For example, you may be looking to apply for Medicaid and need to spend down your assets to qualify for the program. Opting into a prepaid funeral contract can help you do this. (Read more about how you can take advantage of this strategy with an elder law or estate planning attorney.)

In addition to burial or cremation costs like caskets, urns, or burial plots, you may be able to include other expenses in your prepaid funeral plan. This can vary, but may include:

• transportation to a cemetery for your family members
• floral arrangements
• gravesite services
• catering
• services of a funeral director

What to Look Out for When Prepaying for Funeral Services

However, consumers lose millions of dollars every year when pre-need funeral funds are misspent. A funeral provider could mishandle, mismanage, or embezzle the funds. Some go out of business before the need for the pre-paid funeral arises. Others sell policies that prove to be virtually worthless.

In the 1980s, consumers received some protection from unscrupulous funeral providers with the creation of the Funeral Rule. Under this rule, the Federal Trade Commission (FTC) requires funeral providers to give consumers accurate, itemized price information and other specific disclosures about funeral goods and services.

Unfortunately, the Funeral Rule does not apply to many of the features of pre-need contracts that fall under state law. Plus, protections vary widely from state to state. Some state laws require the funeral home or cemetery to place a percentage of the prepayment in a state-regulated trust or to purchase a life insurance policy with the death benefits assigned to the funeral home or cemetery. Other states, however, offer buyers of pre-need plans little or no effective protection.

The FTC recommends exploring several aspects of a pre-need funeral arrangement in detail before you sign up. You also may wish to consult with an attorney on these ideas before signing anything. The following come from tips the FTC shares on its Shopping for Funeral Services consumer advice page:

• Ask what will happen to the money you will spend on a prepaid contract. States have different requirements for handling funds paid for prearranged funeral services.
• Get information on what happens to the interest income on the money you prepaid and put into a trust account.
• Determine whether or not you'll have any protection if the firm you dealt with ever goes out of business.
• Can you cancel the contract and get a full refund if you change your mind?
• You may move to a different area or pass away when you are away from home. Determine whether someone can transfer your prepaid funeral plan if necessary. (This is often possible at an added cost.)
• In addition, get details on exactly what you are paying for and compare this with other funeral providers.
• Confirm that the price you are prepaying is final. You want to avoid anyone having to owe additional money to cover funeral expenses once you've passed away.

Communicate With Your Loved Ones

Of course, you can avoid many of these pitfalls by making decisions about your arrangements in advance, but not paying for them in advance. Either way, tell your family about the plans you've made and also make them aware of where you've filed the pertinent documents. You may also wish to consult an attorney on the best way to ensure that your family members follow through on your wishes.

If you're just beginning to do your research and compare prices, connect with trusted loved ones on funeral homes they may recommend. See if one of them would be willing to join you when you make visits to different homes.

Consider a Payable on Death Account

To guarantee money is available to pay for your funeral, work with your bank to set up a payable-on-death (POD) account. (Note: Not all states offer POD accounts as an option.) Name the person who will be handling your funeral arrangements the beneficiary (and make sure they know your plans).

With a POD account, you will be able to maintain control of your money while you are alive. Then, when you pass away, it is available immediately to the beneficiary, without having to go through probate.

You be interested in exploring other potential options for prepaying, such as final expense insurance (also called burial insurance). Your insurance provider or an elder law or estate planning attorney can help you identify a suitable policy.

What Else to Keep in Mind

In some cases, it can be more convenient and less stressful to "price shop" funeral homes by telephone or online, rather than in person. The Funeral Rule requires funeral directors to provide price information to anyone who asks for it.

If you have questions about your state's laws, most states have a licensing board that regulates the funeral industry. Elder law and estate planning attorneys also have the expertise to help you with planning and to guide you on your rights. Find a qualified attorney in your area who can help.

Additional Reading

For more information about planning arrangements for services for yourself or a loved one, check out the following articles:

• What to Look for in a Prepaid Funeral Plan
• How You Can Help Your Loved Ones by Planning Your Funeral Arrangements
• Getting Funeral Pricing Information Is Difficult, Consumer Surveys Show
• Alternatives to Traditional Funeral Arrangements
• How to Make Your Funeral Wishes Known