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Prepaid Funeral Expenses and Your Estate Plan

If you haven’t given any thought to prepaid funeral expenses, it’s worth considering to ensure your final wishes are carried out and to take care of mourning loved ones financially.

According to the National Funeral Directors Association, the average cost of a funeral is around $7,000 nationally. But the total end-of-life costs can easily rise to $20,000+. And while the assets that you disburse through your estate may be more than adequate to help your family cover those costs, the estate distribution process can be time consuming or even contested, which could mean those assets aren’t immediately available. One thing that can make that all a little easier is considering prepaid funeral expenses.

Thinking about the financial obligations involved with you or a loved one passing away can be particularly uncomfortable. Still, the uncomfortable subjects are some of the most important to prepare for. Prepaid funeral expenses can go a long way in making this process easier for you or the ones you leave behind.

A prepaid funeral plan is part of your estate plan that allows you to make your funeral arrangements ahead of time and have them paid for to remove the added burden when the time comes. When losing a loved one, a prepaid funeral plan can be extremely valuable as there is already a lot on the entire family’s minds. Any tasks that can be taken off their hands will make the weight of loss a little easier to manage.


Plans for Prepaid Funeral Expenses

There are four primary plans for prepaid funeral expenses:

  • Whole-life policy
  • Burial insurance
  • Revocable trust
  • Irrevocable trust

A whole-life policy is essentially the same as a standard life insurance policy. You pay premiums until the death of the insured person, at which point you receive the death benefit for the predetermined amount. To appropriately go towards prepaid funeral expenses, you may need to have the policy’s beneficiary be the funeral home where arrangements have been made. This is not always necessary, but can be an effective way to make burial processes run smoother.

Burial insurance works similarly. Burial insurance covers all costs and expenses related to death. While this is the case, a beneficiary of either kind of insurance policy could use the money in whatever way they decided. Having a legal obligation to have the funds contributed towards funeral expenses could be a good idea to ensure the money goes toward funeral expenses.

A revocable trust will often indicate that you pay for your funeral with installments over time. The funds that you put towards your funeral are placed in an interest-bearing account and, at the time of death, are released to the funeral home or other beneficiary to pay for the funeral. An irrevocable trust works the same way, except it cannot be changed in any way by anyone except the beneficiary of the trust.

There are some drawbacks in planning for prepaid funeral expenses. If death happens sooner than expected or if the funeral home goes out of business, you could be in for legal or financial difficulties. If you’re using a trust to reach the total amount of the funeral expense before passing, an early death will leave a gap for survivors to cover. If the funeral home goes out of business, but funds have already been given to them, you may not have a path to getting them back.

Prepaid funeral expenses are essential to consider to ease the burden of losing a loved one. While the process is easier to deal with, make sure you consider all possibilities, so you don’t cause more problems for yourself and others down the road.

Do you plan on prepaying for a funeral, or do you feel it is not worth the investment?


Nancy Zambell has spent 30 years educating and helping individual investors navigate the minefields of the financial industry. She has created and/or written numerous investment publications, including UnDiscovered Stocks, UnTapped Opportunities, and Nancy Zambell’s Buried Treasures under $10. Nancy has worked with for many years as an editor and interviewer for their on-site video studios.