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Bill of Rights for Funeral Preplanning
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Preplanning a funeral can offer family members peace of mind, as well as the opportunity to plan a meaningful funeral that reflects the unique life of the individual. Meeting with a local IFDA funeral director is a good way to ensure you have all of the information you need to make informed decisions, and that your wishes are carried out.

Before making any decisions on preplanning or prefunding funeral goods or services, or signing a preneed funeral contract, we urge you to ask any and all questions you may have regarding the planning process.

An ethical and reputable IFDA funeral home will ensure the following rights and protections:

  • Provide you with detailed price lists of goods and services before you make your selections.
  • Provide to you, at the conclusion of the funeral arrangement conference, a written statement listing all of the goods and services you have purchased and the price.
  • Give you a written preneed funeral contract explaining, in plain language, your rights and obligations.
  • Guarantee in the contract that if any of the goods or services you have selected are not available at the time of need, goods and services of equal or greater value will be substituted at no extra cost.
  • Explain in the contract the geographical boundaries of the funeral home's service area and under what circumstances you can transfer the preneed contract to another funeral home if you were to relocate, or if the death were to occur outside of the service area.
  • State in the contract where and how much of the funds you pay will be deposited until the funeral is provided.
  • Explain in the contract who will be responsible for paying taxes on any income or interest generated by the preneed funds that are invested.
  • Inform you in the contract whether, and to what extent, the funeral home will guarantee the price of goods and services you are purchasing. If the prices are not guaranteed, the contract will explain who is responsible for any additional amounts that may be due at the time of the funeral.
  • Explain in the contract whether and under what circumstances you may cancel your preneed contract and how much of the funds you paid will be refunded.
 
     
   Why Preplan?  
     
 

The decision to preplan your funeral is a very personal one. It is very normal to approach this decision with a great amount of anxiety due to the sensitivity that can surround this subject. Those who ultimately take the important step of documenting their wishes regarding their funeral and ultimately sharing these decisions with loved ones usually express a great sense of comfort and relief.

How do I start the process?

Begin by identifying what you and your family need and want for a funeral and how much you can afford. You should know that the Federal Trade Commission (FTC) Funeral Rule regulates funeral providers. The rule protects consumers by requiring all funeral homes to provide a General Price List with the current cost of each item and service offered. The price list must also disclose information about your right of selection, embalming, containers for cremation, cash advances and any required purchases.

Cash advances are for goods and services that may be paid for by the funeral provider on your behalf, such as flowers, obituaries, a cemetery plot, pallbearers or clergy honoraria. If the funeral provider adds a service fee or receives a discount, refund or rebate for providing this service, it must disclose this fact to you.

Can you plan a funeral in advance without paying for it?

Yes. It is possible to select funeral goods and services in advance with a specific funeral home without prefunding a funeral. You many also choose to pay for a funeral in advance without selecting specific goods and services. If you do either of these, be aware that the price of a funeral usually will not be guaranteed.

When you choose to fund a funeral in advance, you’re entering a contractual agreement with the funeral home. Each state regulates preneed agreements (or contracts), and many states strictly regulate the content of the preneed contract.

Check with your funeral director, the attorney general’s office or funeral regulatory board or agency in your state for specific information. Illinois preneed funeral and burial purchases are regulated by the State of Illinois Comptroller's Office. The Illinois Consumer Guide to Pre-Need Funeral and Burial Purchases is available HERE.

Who can help me prearrange my funeral?

In several states, only funeral directors may prearrange funerals. Check your state laws and the credentials of the person offering the preneed contract. If he or she is not with a funeral home, ask to see a copy of the agreement between this person and the funeral home you wish to use to conduct the funeral. In Illinois, sellers of preneed services or merchandise must be licnesed by the State of Illinois through the Office of the Comptroller.

How can I learn more about planning my funeral in advance?

To obtain detailed information about arranging the funeral you want, contact a funeral home in your community with a reputation for reliability and quality service. IFDA-member funeral homes, as a condition of membership, are required to follow the IFDA Code of Professional Conduct signifying their commitment to ethical business practices. Every circumstance, every person and every family is unique. Your IFDA funeral director will help you plan a meaningful funeral that meets your personal needs and purpose.

 
     
   Bill of Rights for Funeral Preplanning  
     
 

Preplanning a funeral can offer family members peace of mind, as well as the opportunity to plan a meaningful funeral that reflects the unique life of the individual. Meeting with a local IFDA funeral director is a good way to ensure you have all of the information you need to make informed decisions, and that your wishes are carried out.

Before making any decisions on preplanning or prefunding funeral goods or services, or signing a preneed funeral contract, we urge you to ask any and all questions you may have regarding the planning process.

An ethical and reputable IFDA funeral home will ensure the following rights and protections:

  • Provide you with detailed price lists of goods and services before you make your selections.
  • Provide to you, at the conclusion of the funeral arrangement conference, a written statement listing all of the goods and services you have purchased and the price.
  • Give you a written preneed funeral contract explaining, in plain language, your rights and obligations.
  • Guarantee in the contract that if any of the goods or services you have selected are not available at the time of need, goods and services of equal or greater value will be substituted at no extra cost.
  • Explain in the contract the geographical boundaries of the funeral home’s service area and under what circumstances you can transfer the preneed contract to another funeral home if you were to relocate, or if the death were to occur outside of the service area.
  • State in the contract where and how much of the funds you pay will be deposited until the funeral is provided.
  • Explain in the contract who will be responsible for paying taxes on any income or interest generated by the preneed funds that are invested.
  • Inform you in the contract whether, and to what extent, the funeral home will guarantee the price of goods and services you are purchasing. If the prices are not guaranteed, the contract will explain who is responsible for any additional amounts that may be due at the time of the funeral.
  • Explain in the contract whether and under what circumstances you may cancel your preneed contract and how much of the funds you paid will be refunded.
 
     
   Prefunding Options  
     
 

Types of Funding

It is very important to discuss funeral plans and prefunding details with your family. If you choose to prefund a funeral, select the payment option that best meets your specific needs. The following options are commonly available to fund a funeral in advance.

Trusts

Trusts may be used to prefund funerals in most states (including Illinois) in accordance with specific state laws. Depending on the type of trust, it may be managed by the funeral home, cemetery, a bank, a state association or the state itself. Funeral trusts may or may not be guaranteed to keep up with inflation for a specified period of time. With a guaranteed, fully funded trust, there generally is no balance due at the time of death. If a trust contract is not guaranteed or fully funded, there may be a balance due to the funeral provider at the time of death. Trust proceeds are usually taxable to the purchaser. If you are unclear about your trust protection, discuss your state’s trust funding laws with the funeral provider or a state regulator. State laws vary.

Insurance

A form of whole life insurance, preneed insurance products may be used to prefund funerals in most states in accordance with state laws. The consumer purchases a specialized insurance policy that has growth value, meaning that the face amount or death benefit will increase over time to pay for funeral costs at time of death. Preneed insurance may be paid by a one-time cash premium with no further premiums due for the term of the contract, or by installment. Policy growth and the payout amount are not taxable to the purchaser. If you are unclear about your preneed insurance protection, discuss your state’s preneed laws with the funeral provider or a state regulator. State laws vary.

Other Funding Options

Payable-on-death (POD) accounts may be established in some states for the purpose of paying for funerals, often when death is imminent. Typically, a POD is held jointly by the consumer and the funeral home. Upon the consumer’s death, the account automatically goes to the funeral home. POD accounts do not guarantee that a funeral will be paid for in full – the family or estate is responsible for any shortfall.

Certificates of deposit (CDs) or savings accounts, jointly held with a family member who has “right of survivorship,” provide funeral benefits similar to a POD account, with the funds passing to the joint owner outside of probate.

Private trust funds for the purpose of paying for a funeral are established by some individuals at their own banks.

Other Assets

Savings accounts or life insurance are existing assets that may be earmarked in advance for funeral costs. However, you must ensure that your family and attorney have been informed and that provisions are made to access the funds upon your death. In most states, you are allowed to assign the benefits of an existing life insurance policy to a funeral home.

Annuities may, in some circumstances, be adapted for preneed, usually for individuals of advanced age or with chronic health problems or in other circumstances.

 
     
  With all of the above types of funding, state laws controlling what is allowed and disallowed vary, including how excess funds, if any, are handled. 
 
     
   Preneed Contracts  
     
 

It is very important that you always read a preneed contract very carefully and make sure you understand each provision before you sign.

Every preneed contract should include the following components to protect all parties in the agreement:

  • Identification of the seller (the funeral home provider), purchaser and person for whom the contract is purchased
  • Identification of trustee or insurer when applicable
  • Rights and obligations of all parties
  • Complete description of all goods and services purchased and their specific prices
  • How the contract is to be funded
  • How substitutions may be made if goods or services are unavailable at time of need
  • Ability-to-transfer agreement or funding to another funeral home
  • Effect of a change in beneficiaries
  • Where and amount of funds deposited until the funeral occurs
  • Tax implications, if any
  • Party responsible if additional funds are due at time of need
  • Party to receive any excess funds
  • Cancellation and refund policy
  • Effect of missed or late payments
  • What is included or excluded in any price guarantees.*

*There may be goods and services required at the time of the funeral that are not part of a preneed contract since they cannot be paid in advance. Always ask for clarification about the handling of any items that may still be needed when death occurs.

 
     
   Other Considerations  
     
 
  • Effect of Inflation: When prices of the funeral goods and services being purchased are not guaranteed in the contract with the funeral home, it is very important for you to know whether funds planned to be available at the time of death will be sufficient to pay off the total cost of the funeral (your available funds may include trust or insurance proceeds and/or other funds).
  • Guaranteed Price: A guaranteed price contract means that the funeral home accepts your payment as payment in full at time of death for the goods and services you selected in your contract. Your survivors or estate will not have to pay additional funds for guaranteed contracts. Certain items that the funeral home has no control over, such as cemetery costs and clergy honorariums, are typically not included in the price guarantee. State laws vary.
  • Non-guaranteed Price:  A non-guaranteed price contract means that if the payment option you have chose is insufficient at time of death to cover the total cost of the funeral you have selected, your survivors or estate must pay any difference. Preneed funds in excess of the actual cost of the funeral at the time of need are usually refundable to the estate, but not in all states. Be sure to ask your funeral provider for details.
  • Revocable ContractsRevocable contracts usually allow the purchaser to cancel a contract and withdraw the trust principal and any accrued interest at any time or to transfer an insurance-funded contract to another funeral home. Some states allow the seller to collect a trust cancellation or transfer fee.
  • Irrevocable Contracts: An irrevocable contract is an agreement that cannot be cancelled (you may, however, be able to transfer or reassign the contract to another funeral home). Most states permit an insurance assignment to be made irrevocably if the consumer anticipates a later need to qualify for a public-assistance program (see Medicaid/SSI).
  • Initial Cancellation Period: Many states provide an initial cancellation period when the purchaser may cancel the preneed contract and receive a complete refund (state laws vary). Preneed contracts entered into at a place other than the funeral home may be subject to the FTC’s 3-Day Cooling-Off Rule that allows consumers to cancel certain types of contracts at any time prior to midnight of the third business day after the date of the transaction. The FTC rule does not preempt state cancellation laws. Check with your state or local consumer office for more information about your cancellation rights. With insurance-funded contracts, the purchaser generally has cancellation and refund rights under the policy that exceed the rights mentioned above.
  • Insurance Cancellation: If a preneed contract funded by an insurance policy is revoked and the purchaser cancels the insurance policy, he or she will receive only the cash surrender value of the policy, which typically is significantly less than the face amount of the insurance policy.
  • Portability/Transfers: Many preneed plans offer portability (the ability to move a plan with you to another state or to transfer it to another funeral home). Again, state laws vary. Ask about the specific portability and transfer features of trust and life insurance options for funeral agreements and any impact such changes may have on price guarantees. Some funding options have more transfer flexibility than others.
  • Medicaid/SSI: When making a preneed agreement, identify the effect on the agreement if you ever need to qualify for Medicaid or SSI benefits. Under Medicaid law, irrevocable funding and some revocable funding of a preneed contract are recognized as excludable assets that do not affect an individual’s Medicaid or SSI eligibility. States place specific dollar limits on the amount of a preneed contract that is excludable.
  • Helpful Hints: Ask the funeral professional with whom you are meeting to give you enough time to ask all of your questions. Take notes during the arrangement meeting. If you are not a good note-taker or simply want to concentrate on listening, have another person in the room take notes and jot down questions.

Questions to Ask

  1. Please explain the difference between the basic services fee for professional services and the other services that might be listed in the contract. Why are there two types of charges?
  2. Please carefully explain any price guarantees and any items that are not covered in my contract.
  3. What happens if I want to change the type of funeral service or what I’ve purchased at a later date?
  4. What happens if my family wants to make changes at my death?
  5. If I need the services of two funeral homes in two different states, will there be two separate bills?
  6. What happens if there isn’t enough money to pay for the funeral when I die?
  7. If I change my mind after signing, how much time do I have to cancel and have my deposit returned? If I cancel after the time limit has expired, what will I be refunded?
  8. How do I know my money is safe? Who do I contact to ask at any time about the status of my account?
  9. What happened to my contract if the funeral home goes out of business or changes owners?
  10. Is there any other vital information I need to know about possible additional charges, documents I’ll need, the cemetery purchase, graveside charges or ground or air transportation?
 
     
     
  Original article may be found at National Funeral Director's Association HERE.
 
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