Funeral FAQs #3

Q1. What happens to pre-payment money? What are some cautions/suggestions prepaid plans?

A1.Chris and Stephanie Goes, Goes Funeral Care & Crematory:

The Colorado Insurance Commissioner is cracking down more and more on poor funeral funding practices. Most pre-paid money is now well invested, but it is highly recommended that the opinion of a trusted advisor be considered prior to pre-paying for funeral services.

Pre-paid funeral money is placed by funeral homes in either their funeral home trust or into a life insurance policy. It is recommended here that such funds be placed into a life insurance policy, or some other self directed investment. The owner, purchaser, retains control and can use the proceeds anywhere upon death, as opposed to a trust or provider owned account where the money may be partially or fully spent and is tied to only one funeral home. Insurance is also a safety measure against the possibility of the funeral home going out of business or making any early withdrawals. Legally, a funeral provider may spend a percentage of trusted money and keep any growth when money is placed into a “funeral trust”. Whole life insurance may not be the best possible “investment” but is still a good vehicle in which to place funeral expense money and to insure peace of mind. In any event, consulting with a trusted financial advisor, not a salesman, is always a good idea. Make sure the beneficiary is either the estate of the person or a family member or other individual with insurable interest. That would never be the funeral home or sales person.

There is such a contract as an irrevocable and permanently assigned plan. Such a contract is only necessary if and when the owner needs to apply for Medicaid or public assistance and wants to or needs to preserve their money for the type of funeral plan desired. The irrevocability removes the money as an asset and sets it aside strictly for funeral use.

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