Prepaid Funeral Arrangements

The loss of a loved one is difficult and emotional for everyone involved. In addition to the emotional burden, there are also financial considerations that need to be addressed, such as the cost of the funeral and other final expenses.

A 2017 study from the National Funeral Directors Association (NFDA) found that while 62.5% of U.S. consumers believe it’s important to communicate funeral plans and wishes to family, only 21.4% have actually done so. Many who were interviewed stated that funeral planning fell low on their priority list, or that funeral planning was too expensive.

Funeral Trusts
Funeral trusts alleviate many emotional, practical, and financial burdens, and provide peace of mind to families during the difficult time. While there are many terms for “funeral trusts,” it’s important to understand the difference between two broad categories: Prepaid Funeral Plans and Irrevocable Funeral Expense Trusts.

How Does a Prepaid Funeral Plan Work?
A Traditional Prepaid Funeral Plan is a contract with a funeral home to set aside funds in advance for final expenses. Plans are customizable, with funds typically covering expenses such as: funeral, burial or cremation, casket, cemetery charges, and more. Payments are made directly to the funeral home or through a pre-paid contract provider in monthly installments.

While a Prepaid Funeral Plan can be a tool to honor a loved one’s wishes and lock in prices in advance, there are several notable risks and disadvantages:

• The funeral home could go out of business, exposing funds to creditors.
• Funds could also be mishandled by the funeral home.
• In some cases, funeral expenses are less than what was paid ahead of time.
• Conversely, hidden fees or unexpected expenses can mean the family has to pay more.
• Most Prepaid Funeral Plans are non-transferrable and non-refundable.

How is an Irrevocable Funeral Expense Trust Different?
The Irrevocable Funeral Expense Trust is a single-premium whole life insurance policy assigned to a free, irrevocable trust. A safer and more stable option than the Prepaid Funeral Plan, it fully secures a portion of an individual’s assets until they’re needed to pay end-of-life expenses.

Instead of risk being placed on the policyholder, it is transferred to the insurance company, which pays directly to the funeral home of choice. The Funeral Expense Trust is also convenient—rather than a long, uncomfortable session at a funeral home, policy-writing can be conducted from home.

Protected under Federal Medicaid law, the trust is 100% free with no up-front fees or taxes. The policy value grows to account for increased market value costs, and whatever is not spent on funeral expenses is refunded to the estate of the deceased.

Get Started Today
Ultimately, the Funeral Expense Trust provides families time to grieve properly without having to worry about paying for a funeral. While it might be uncomfortable for you to think of your final expenses, by talking to an Elder Life Group Advisor, you can benefit your retirement plan now and your family later.

To learn more about the Irrevocable Funeral Expense Trust, visit our page on Prepaid Funerals or contact us today.

 

For our Financial Advisor Partners

Supplementing larger retirement or long-term care planning strategies, Funeral Expense Trusts have been transformational for funeral planning in the U.S.

By ensuring safe end-of-life arrangements through funeral expense trusts, insurance and investment advisors are meeting critical family needs.

Elder Life Group is the nation’s largest funeral expense trust distributor. Discover how you can leverage the Funeral Expense Trust to grow your practice.

Start with a definition
There are many terms for “funeral trusts” or that at least sound like they are the same, but are actually different. You may have heard them referred to as prepaid funeral plans, Medicaid exempt funeral trusts, funeral trusts, funeral expense trusts, irrevocable funeral expense trusts, prepaid funeral policies and more. While minor differences exist, there are two broad categories: Traditional Prepaid Funeral Plans and Medicaid Exempt Funeral Trusts.

Traditional Prepaid Funeral Plans
These are made with a funeral home and have some limitations. A traditional prepaid funeral plan sets aside funds in the form of a contract with a funeral home. Funeral homes may offer different packages, which can include:

• Funeral
• Burial/Cremation
• Basic Services of Funeral Director & Staff
• Embalming
• Funeral Home Facilities and/or Staff Services
• Casket
• Cemetery Charges
• Cemetery / Burial Plot
• Other Funeral Merchandise
• Other Charges

However, what if the funeral home goes out of business or mishandles the funds? What if the funeral costs less than what you prepaid? Your options might be limited since your agreement is with that funeral home and may not be able to be transferred. Essentially, you may be paying for something that isn’t guaranteed.

These funds are also less protected and can be exposed to creditors. Perhaps you believe that your estate can handle the expenses later? That could be true, but your family may have a lengthy probate process. The result is a stressful situation for your family during an emotional time.

Medicaid Exempt Funeral Trusts
A safer option for setting aside funeral expenses is a Medicaid exempt funeral trust. This is a combination of a small, guaranteed-issue life insurance policy that is irrevocably assigned to a free trust. It transfers all risk to the insurance company, which then pays the funeral provider on your behalf. Have a loved one facing a long-term care situation? The trust even speeds up Medicaid eligibility by spending down your countable assets. It is similar to the traditional prepaid funeral plan since it allows you to set aside funeral expenses through an irrevocable trust, but comes with multiple benefits:

• They are convenient. You can conduct the entire policy-writing process from home.
• You’re not required to commit to a specific funeral home. You or your family make that choice when necessary.
• The trust itself is included for free with no fees up front or tax on any excess back to your estate.
• You may choose whether or not to set specific plans.
• These trusts cannot be altered and are considered exempt for Medicaid purposes as long as the value is below a state-specific limit – $15,000 in most states.
• Your assets are protected for the sole use of your final expenses.
• They are guaranteed to be safe from creditors and predators.
• The policy value grows steadily to account for rising market costs.
• Proceeds are paid directly to the funeral home, this allows for prompt funeral-provider payment.
• Your family chooses where and how much to spend. Whatever is not spent is refunded to the estate of the deceased.

How to Use Medicaid Exempt Funeral Trusts
So, how do you use a Medicaid Exempt Funeral Trust? These trusts are a great add-on when going through Long-Term Care Pre-Planning and can be particularly beneficial during crisis planning. Plus, some states allow applicants to purchase trusts for their immediate family members. This makes them a great addition to any long-term care crisis planning spend-down plan.

Elder Life Group is the largest distributor of this funeral trust in the nation and we remain actively involved in its continual improvement. Best of all, we’ve made it easy to secure by anyone in just a few quick steps.

1. Final Expenses Evaluation: First, we understand your financial situation. We can do this conveniently over the phone, and can even take care of all the paperwork electronically.
2. Customized Plan: We tailor a plan to your needs based on your state’s rules. This is completely confidential and takes a matter of minutes with an Elder Life Advisor.
3. Start Your Policy: All we need is your name, telephone number, and Social Security number—no medical details or other personal information.

Learn more by visiting our page on Prepaid Funerals.

 

For our Financial Advisor Partners
The Medicaid exempt funeral trust is a staple for any long-term care plan, whether your client is planning ahead or already in a care community. In addition to preserving your client’s assets for end-of-life expenses, it is a simple and effective way to enhance your planning options.

You can leverage this product directly for your clients. Contact us today to find out more.