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Prepaying a funeral? Know the downsides

Family learns "pre-need" plan has exclusions
Posted at 5:16 PM, Aug 07, 2020

If you have relatives who are getting older, they may be considering pre-paying for their funeral to make things easier for their survivors when they pass.

Funeral directors will tell you prepaying for your funeral is a great way to save your loved ones stress and hassle. But one family wants to know why they still owe money after prepaying.

Tonkia Bridges thought everything was taken care of when 98-year-old Willa Goodwin, the woman she took care of and loved, passed away.

"She paid for a pre-need service in full," Bridges said. "And on the receipt it says, 'Paid in full, thank you.'"

Goodwin bought a "pre-need" funeral policy that was supposed to cover all expenses. When Bridges and a surviving cousin went to the funeral home, "They told us she had paid for everything but the opening and closing of her grave."

That was going to cost them another $500, which neither Bridges nor her cousin had during the pandemic.

Why the extra fee?

It turns out the original funeral home, which sold the policy more than a decade ago, had shut down, and not all the money could be found by the funeral home that handled the funeral.

Bridges thought that would not be an issue.

"We were advised by hospice that the funeral homes transfer those services to another funeral home," she said.

We checked with the funeral home handling the services.

The owner did not want to talk on-camera, due to a hoarse voice. He did explain, though, that he was never part of the original prepaid policy; he was trying to handle everything as a service to the family.

The owner said he went beyond what was left in Goodwin's policy, and ended up paying an additional $800 of his own money. He says he cannot spend any more on grave-opening fees at this point.

How to protect yourself

Bridges wondered how many other families think they are fully covered when they aren't.

"It made me feel maybe this has happened to other people, and they may not even know it," Bridges said.

Kiplinger Personal Finance says prepaid funerals can be a smart idea. But it says:

  • Make sure the money goes to a trust or insurance company, not a specific funeral home that could go out of business.
  • Get a plan that keeps up with inflation.
  • Make sure it covers an upgraded casket, not a bare-bones model.
  • Do a "check-in" every five years or sooner if the person is older.

Finally, it is a good idea to make sure everything is covered, including hearse fees and cemetery fees, which Bridges and the surviving cousin may now have to pay.
That way, you don't waste your money.

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