Prepaid Funeral Plans
Many people we talk to each day truly understand how pre-planning their funeral services will bring peace-of-mind. But what can cause them concern (what often stops them from moving forward with their intention) is their lack of knowledge regarding the differences among prepaid funeral plans. This, and to some degree, the undercurrent of anxiety they feel about the very idea of pre-paying for funeral services.
In basic terms, pre-payment (or pre-funding) simply refers to the setting aside of funds sufficient enough to cover the future expenses of the services and products noted in their funeral pre-need plan. We'd like to take some time here to explain your pre-funding options, as defined by the State of Michigan and the Federal Trade Commission's regulatory guidelines governing our profession (which are collectively known as the Funeral Rule).
Your Two Funeral Pre-Payment Options
In Michigan, there are two ways to pre-fund your funeral plan: by placing the required funds into an escrow (or trust) account overseen by the funeral home (under the watchful eye of Michigan regulatory agencies); and the purchase of funeral insurance. Let's discuss the first option: the escrow-funded funeral pre-arrangement plan.
Escrow Funeral Pre-Plan Funding
Let's discuss the first option: the escrow-funded funeral pre-arrangement plan. When this type of plan is chosen, the interest stays with the escrow fund; and you are completely responsible for paying any capital gains or other taxes (unless you select a fund where escrow bears this liability). Here's what you really want to know: when you pre-fund your funeral plan using an escrow or trust account, the funeral home in question cant access the funds without providing proof the funeral pre-arrangement contract has been fulfilled. One other thing to know about escrow funded plans: You can cancel the contract at any time and for any reason (unless the Department of Human Services has certified it as irrevocable). If canceled, the funeral home in question can charge you up to 10% of the escrow principal and any accrued interest, as a cancellation fee. (You will receive all other monies contributed, along with any interest you're owed by the bank.)
Unfortunately, unscrupulous people exist in every profession, including funeral service. You may recall, during the past decade, many local journalists have covered the legal cases of a number of funeral directors charged with embezzling trust funds set aside by families to cover the expenses of a funeral pre-arrangement plan. Yes, it does happen; and the lack of ethics is truly beyond our understanding. Here's how we've chosen to respond: because such occurrences undermine the peace-of-mind provided by funeral pre-planning, we endorse the second funeral pre-funding option, that of funeral insurance.
The Michigan Funeral Directors Association, on their webpage dedicated to the topic of planning ahead, offers readers these insights into pre-funding your funeral plan using a funeral insurance policy. "With this option, you select funeral services in advance of death and purchase a life insurance policy sufficient to cover the anticipated cost of the funeral. Here, the funeral home "accepts the risk that the funds may not be sufficient to cover the costs when the death occurs." In addition, they tell readers, "insurance-funded funeral prearrangements may only be sold by persons who are licensed by the Michigan State Office of Financial & Insurance Regulation." In compliance with this requirement, each of our pre-arrangement specialists is fully licensed and participates in regularly-held seminars related to the sale of funeral insurance sponsored by state and national professional associations. Our funeral pre-arrangement specialists are considered by area families to be among the most trusted of those similarly-licensed professionals employed by the funeral homes in Detroit, Warren or Grosse Pointe.
What is a Pre-Paid Funeral Contract?
Let's start at the beginning: when you pre-plan your funeral, you have the option of choosing only to plan the services and select related products without paying for them ahead of time; or you can choose to pre-pay your funeral services. The Michigan Department of Licensing and Regulatory Affairs (LARA), which oversees our profession; offers this definition of a pre-paid funeral contract: it is one which requires "payment in advance for funeral or cemetery services or merchandise, physical delivery and retention of which would occur after death under a guaranteed price contract or a non-guaranteed price contract." They go on to tell readers:
• A guaranteed price contract is one where the cost of specific funeral services and products are guaranteed never to rise, "regardless of the cost or value of the merchandise or funeral or cemetery services at the time of death of the contract beneficiary."
• Its alternative, a nonguaranteed price contract; is one where the costs of selected funeral services and related merchandise are subject to inflationary increases. Such a contract does not obligate your next-of-kin to purchase any specific merchandise or services selected prior to your passing; and in no way requires the expenditure of any specific amount on any service or product.
For additional legal insight into pre-arrangement contracts and consumer-protection guidelines regarding prepaid funeral plans, read the Michigan State Attorney General's "Pre-Paid Funeral Contracts". And for a deeper look at issues around the cost of funeral services, we suggest reading one or both of the following pages: Funeral Expenses and Funeral Costs. Naturally, if you have any questions about anything you read here, we urge you to call us at 313.881.8500.
For Us, It's All about Choice
We believe we serve families best when we offer them a choice. A choice of services...a choice of facilities...and a choice of costs. When you reflect on this commitment, take into account our professional knowledge and expertise (gleaned from decades of experience); you'll quickly see why funeral pre-planning with Charles Verheyden Funeral Homes, Inc., of all the funeral homes in Detroit, is the right decision.
We promise you this: after pre-planning your funeral with us; you'll have the profound sense of peace which comes from knowing your best interests always came first throughout the funeral pre-planning process. Families also tell us there's also great comfort in knowing Charles Verheyden Funeral Homes, Inc. will continue to serve their family with this same level of personal attention far into the future.
Here's What Comes Next
Despite the many cautionary articles on the subjects of funeral pre-planning and prepaid funeral plans; we are completely confident of our ability to guide you in making the pre-funding decisions which are right for you and your family.
We invite you to get in touch with us to further discuss the facts about purchasing funeral insurance, or to review your funeral pre-funding options in greater detail. Call us at 313.881.8500 to set an appointment with one of our funeral pre-arrangement specialists.