Preplanning and Prepaying Cremation Costs

Photo of Coconino National Forest 

The loss of a loved one is a difficult time. More often than not, this emotional loss is compounded by a general sense of helplessness. Arrangements such as memorial ceremonies and funeral or cremation services need to be made with very little time at hand. Mental strain coupled with costs involved and uncertainty about the deceased’s wishes regarding final rites can make this a daunting task. 

Preplanning and prepaying for final arrangements can significantly lessen the stress on surviving loved ones. According to U.S.News Money, a 2014 survey by the National Funeral Directors Association found that of respondents only 19 percent of adults over age 40 had preplanned a funeral. Further, of that 19 percent, only about 26 percent had prepaid their funeral costs. 

Below are considerations and information to assist with preplanning, as well as details regarding prepayment for cremation. 

A checklist is provided below for easy reference.  

Begin with end of life care

It is wise to think about where you want to be during your end of life care if you have the choice. Also think about where you want to die, as the two might be different. Discuss these with your closest family or friends. Be prepared for the discussions to be challenging.

Directives are an important part of this discussion, as well. A Power of Attorney for Health Care, a Living Will, and a Do Not Resuscitate when in place save the caregiver a significant amount of distress when end of life decisions need to be made. A caregiver who knows exactly what you want is in a better position to carry out your wishes and can be at peace facilitating them.

Preplanning a memorial service includes choosing a cremation urn

Ask yourself questions such as:

• Where would I like the ceremony to be?
• Do I want a religious or civil ceremony? An ash scattering ceremony?
• Do I want to be cremated, and if so where do I want my ashes to reside?
• Do I want a biodegradable urn, scattering urn, or a memorial urn? 

Research your options for cremation services and cremation urns

A subsequent step might be to set up an appointment with a local funeral director to discuss options and seek professional advice. Check whether the funeral home offers cremation services; if not, identify reputable cremation service providers in your area. 

Another pertinent consideration is the cost involved. Answering the above questions and meeting with a service provider will help to outline associated options and costs. Cremation is more cost effective than a funeral. Cemetery costs and extras like flowers, obituary notices, and limousines can add up to well over $10,000. According to one statistic for the state of California, the average cost of cremation is less than a quarter of the $10,000+ cost of an average funeral and burial. With cremation, there is no need to embalm or to purchase a cemetery plot, casket, burial vault, or gravestone. 

It is advisable to gather relevant information in order to make a wise, measured and economical choice while prepaying and preplanning a cremation. Remember to research your options for cremation urns, and include the cost in your budget.

Prepaying cremation costs

There are multiple ways to prepay. You can enter into an agreement with a service provider who stocks and stores chosen materials right away. This provides assurance but leaves little room for changes later. Alternately the company could put aside a portion covering their costs and commission and put the remainder in a trust. The trust amount can be used when needed and when options and choices are clear. 

A second option is to deposit the money in a bank with a POD (Pay on Death) clause. A payable-on-death account is an uncomplicated and inexpensive way to hold money for a designated person. The person has no rights or access to the account while you are alive. Upon your death, the beneficiary has full access to the funds without going through a time-delay probate process.

Your two choices, then, are to (1) prepay cremation costs with a provider, or (2) keep funds in a POD account. Either way, you agree to pay a specified amount of money, in one lump sum or in installments. 

Considerations to keep in mind

While prepaying has been gaining popularity, one study revealed that 40 percent of seniors who prepaid did not know where the funeral director placed their funds. It is very important to know exactly how your money will be utilized. It is the funeral home’s responsibility to fully disclose this information and provide you with written confirmation. 

Similarly make sure the cremation service provider is licensed in your state and has a good track record. Given that you are investing for an uncertain date in the future, it is advisable to go with a trusted company that has a consistently good track record. This will provide up front assurance that the company will still be in operation when the time arrives. 

It is also important to inform a family member or loved one that you’ve prepaid for your cremation. AARP's online article "Prepaid Funerals: A Grave Error?" tells the story of a woman who prepaid her arrangements when she was 49. At the time she died at 84, the family was unaware and the documents were missing. When the policy was discovered later among her possessions, the funeral home refused to refund the money or apply the prepaid amount toward the cost of the funeral.

The story illustrates how essential it is to inform a family member of your plans. Otherwise, they might make arrangements elsewhere all over again. If you’ve paid in cash always get a receipt.  

Know your legal rights

Certain legal rights exist around prepaying. Find out what these are for your respective state while you are arriving at a decision. For example, in the state of New York if a funeral home sells its business to another funeral home, both funeral homes must provide written notification to you within 30 days of the sale. In turn you can change your arrangements, request your money back with interest, or give written authorization to transfer the funds to another funeral home. 

Obtain a list of the cremation provider’s merchandise, services and facilities offered with prices for each item. Your pre-need agreement with the cremation provider should identify the terms and your rights. Ask a lot of questions and make sure you receive satisfactory answers. 

Summing Up

The nature of a prepaid agreement is such that you pay for something in the future that you will not see actualize. Testimonies about prepaying are overwhelmingly positive from loved ones. There are things to keep in mind. 

Benefits of prepaying:

• You pay in the present for death care services that will be provided in the future. Associated costs increase over the years due to inflation, just like anything else. 
• At the time of a death, cremation providers require immediate payment, but death benefits can take months to arrive. Pre-paying for your final arrangements ensures that your family will not have to pay out of pocket at a difficult time.  
• You can choose between plans that require a lump sum payment or installment payments.
• Most of all, you have the power of choice as to whether you want a simple cremation without a service, a religious service, or an event with burial. You decide all aspects of your final arrangements. 

Possible drawbacks:

• The provider might not honor the agreement and ask the family to pay up or pay more.
• All services paid for or requested might not be honored.
• Products requested at time of agreement could be out of stock or prices may have altered.
• The cremation service provider might not be in business years hence.
• The provider might overcharge you.
• The provider might be overbooked and unable to provide agreed-upon service at the exact time of need.

What to do:

• Research the provider’s history for testimonials and scams. Ask for references. Contact a family that has benefited and ask about their experience.
• Get details of how exactly your prepayment money will be used. Most state laws require the designated amount to be put in a bank account.
• Compare different providers to get an idea whether prices are reasonable or if you are being overcharged.
• Ensure that the provider is licensed to operate in your state for the services being provided.
• Find out the provider’s geographic service area in case the death occurs in a place different from the place services were purchased. 

If the provider doesn’t answer the points stated above satisfactorily, you can always preplan without prepaying.

• Set aside money to cover the anticipated costs. Arrange to make that money legally available to a designated loved one who you trust to carry out your wishes. 
• Alternately you can set the money aside in a bank account with a Pay on Death notation on the ownership description, and let the amount accrue interest until needed. 
• Whether you preplan or prepay, always tell someone who will ensure that your wishes are carried out and agreements honored.
• Be very careful about preserving documents, receipts and the contract or agreement. Be sure a loved one knows the location of the documents and also has easy access to them.

While religious, spiritual or scientific beliefs might dictate what happens to one after death, we can exercise control over how our last rites are conducted. Most online testimonials of prepaying talk about the relief from emotional and financial stress that accompanies a death. At the same time, it is extremely worthwhile to invest time researching options and your rights before you invest your money. Not only does prepaying empower us to exercise our will after death, it also relieves our loved ones of the mental, emotional and financial strain of making cremation arrangements.

CHECKLIST

End of life care

Memorial service decisions

Preplanning and prepaying cremation costs

End of life:

1. Decide where you want to be during end of life care. This decision also informs who will care for you and, to some degree, how you’ll be cared for.
2. Prepare directives
   • Power of Attorney for Health Care
   • Living Will
   • Do Not Resuscitate

Memorial service decisions:

1. Type of ceremony – religious, civil, ash scattering, other
2. Where will the ceremony be held? Make appropriate arrangements with:
   • a funeral home or cemetery
   • or with the location where your ashes will reside or be scattered
   • or with the location for a green burial
3. Do you want a traditional burial? cremation? green burial?
4. Depending on your answer to #3, choose a final resting place for your body or ashes:
   • casket
   • memorial urn
   • urn keepsake
   • scattering urn
   • appropriate shroud for a green burial

Preplanning and prepaying cremation costs:

1. Research history of possible providers. Ask for references and contact the references for their experience with the provider. Look for testimonials and scams.
2. Obtain a list of the provider’s merchandise, services and facilities with prices for each item. Obtain information regarding where your funds will reside and how they’ll be used.
3. Compare providers.
4. Decide between prepaying a service provider or setting aside money in a Payable-On-Death bank account with a designated beneficiary.
5. If the option to prepay a service provider is chosen, obtain an agreement in writing that includes pertinent details regarding your prepayment. Check state laws if applicable.
6. Make sure the provider is licensed to operate in your state for the prepaid services.
7. Find out the provider’s geographic service area in case death occurs in a place other than where the services were purchased.
8. Always inform a relative and/or friend of all details relating to your decision and actions. Be sure a loved one knows the exact location of any relevant documents and has easy access to them.