How to pre-pay funeral-related costs. (Yes – there are multiple ways!)

Pre-paying a funeral is a way to plan and cover the costs associated with your end-of-life services in advance. While this might be thought of as simply lessening the financial burden on your loved ones, it’s more so ensuring your wishes are carried out during a time when your loved ones are ridiculously overwhelmed by emotions and time constraints. Not only are they in the process of grieving, but they’re being confronted about handling no shortage of other issues that result in death. Given how fast the funeral happens, it’s nice to have it settled with details decided. And it’s also nice to ensure there is no question of… who… is paying for it if you have multiple heirs that aren’t all on the same page.

There are several options available for pre-paying a funeral:

• Funeral and Burial Insurance:  You pay regular annual premiums or an upfront premium so that upon your death the insurance payout goes toward your funeral and burial costs. It’s very similar to a whole-life policy, but for a relatively much smaller coverage amount. There are generally three styles to these policies.

  • Simplified Issue allows the issuer to review health history, which may result in a more favorable premium if healthy, but could also result in a denial.

  • Guaranteed Issue does not require a health assessment, but given the increased risk to the issuer means an increased premium to the insured and potentially some coverage limitations.

  • And lastly, pre-need insurance. This type of policy involves a contract with your chosen funeral provider. The agreement includes allowances or specifically chosen products and services. The policy’s payout goes directly to the funeral home rather than the individual beneficiaries you’d otherwise select. I generally see the pre-need insurance route as that’s what’s promoted within the funeral home you may be considering.

• Burial Account: You can set up a separate savings account specifically for your funeral expenses. This is largely done for MassHealth purposes. MassHealth allows an applicant to put $1,500 in this style account without it counting toward assets when determining MassHealth eligibility. But keep in mind, the account must be labeled a burial account by the bank, and not all banks offer this style account.
• Funeral Trust: A funeral trust is a legally binding agreement where you set aside funds for your funeral. These funds are managed by a trustee and are used to cover funeral expenses when the time comes. This route creates flexibility in who would ultimately be selected for funeral services, which is helpful if you’re pre-planning well in advance. If done correctly, this may also be a pot of money that’s considered untouchable by Medicaid. 
• Funeral Society Memberships: Some funeral societies or organizations offer membership plans that include pre-paid funeral services. These plans often come with discounted rates and special benefits.

When considering pre-paying a funeral, it’s important to carefully read and understand the terms of the agreement or policy. Be aware of any fees, commissions, conditions, and restrictions. Additionally, make sure your family or executor is aware of your pre-paid arrangements and knows how to access the funds when the time comes.

Also keep in mind expenses related to a plot, headstone, and bereavement meal. A plot can be purchased well in advance, as well as a headstone placed with a blank date. 

How much does a funeral cost? Take a look at this calculator to see how it could add up.