<p>On a visit to my home state, where I usually spend some time helping my mom with end of life preparations, the topic of burial/cremation trusts came up. Mom was about to put money down on a cremation trust with a local funeral home. But my brother googled the subject, and found reports of fraud in the funeral trust business. I though such things were rather standard, and a good way to avoid last minute price jacking at the time of the event, as well as standard rate increases. </p>
<p>Now I’m wondering what to think as well as how to advise my mom. Any stories, opinions?</p>
<p>We prepaid for my mom’s funeral. It wasn’t a funeral “trust”. It was a prepayment for the funeral with all of the arrangements made. By fully paying, we also locked in the price.</p>
<p>My previous experience is that the prepay money is put in a trust, interest bearing, reported on for taxes each year. And the price is locked at the time. But interesting that your was just a prepay for services.</p>
<p>I believe if it is a “spend down” situation (perhaps headed to Medicaid funding nursing home) a trust is required as the prepaid funeral is an acceptable expense. The money in trust can not be used for any other purpose. Prepaying (regardless of Medicaid) is not uncommon in our area; many like this in place for peace of mind. Vet the funeral home, ask for recommendations locally and it should work.</p>
<p>My Dad has already pre-paid his funeral. My only problem with that is what if the funeral home goes out of business by the time he passes? I guess we’d deal, and he feels better about it, knowing the funeral would be one less thing we would have to take care of.</p>
<p>The Wisconsin Funeral Trust was mis-managed and mis-invested in risky investments. This came to light last summer. It is short about $23M. A state appointed receiver has taken over. My MIL passed away in November and the funeral home did honor her arrangements. They aren’t likely to ever get their full costs re-imbursed. The trust was marketed to consumers and funeral homes as a conservative investment and I’m hopeful, but skeptical, that there will be criminal charges against those who mis-managed. My Aunt had done a pre-planned funeral back in 2009 but that was through an insurance company.</p>
<p>If you are referring to Wisconsin OP, you can probably still do a pre-planned with an insurance company. Just ask funeral homes how theirs work. I doubt any funeral homes in Wisconsin are still working with the Trust.</p>
<p>What you are really buying is a life insurance policy with the funeral home. They make the profit on that policy. Its a HUGE money maker for them. You are better off getting your own whole life policy if she can. If not, set aside some money for that purpose in a money market or mutual fund account. You don’t need to even do a pre-planned with a funeral home, although prepaying can save some costs down the road. You can also buy a plot now to save costs later.</p>
<p>See post #4. As my MIL approached going on medicaid, the nursing home and our attorney urged the pre-planned. I’m pretty sure that if the person is on medicaid at the time of death, any money in savings accounts wouldn’t be available to pay funeral costs at that time. In our state it wouldn’t be available for 3-6 months until the proper affidavits were filed and settlement was made with the state medicaid recovery folks. They are the ones that recover any assets the deceased had at the time of death. I think funeral costs would be an allowed expense but from 2 experiences I’ve had, MIL and Aunt, pre-planned is much simpler.</p>
<p>I would think a life insurance policy at an advanced age would be very expensive if obtainable at all.</p>
<p>Having my mother’s body cremated cost $1100 for all the expenses, including an urn. I would think the legal expenses of setting up a trust would be close to that. (I did a quick Google to see what costs are now… I can be cremated for $495 here in Portland. Nice to know.)</p>
<p>Dmd, our prepay with the funeral home was for cremation. I believe it was $1100 total…no extra fee at all to “set this up”. It was a contract with the funeral home.</p>
<p>Our irrevocable funeral trust was done for Medicaid, and it allows us to use the funds at any funeral home. Some people that simply prepay funeral homes can find themselves out of luck if it goes out of business. </p>
<p>Final expense insurance is similar but different than a funeral trust. For one thing, it counts as an asset for Medicaid.</p>
<p>Our next-door neighbor’s mother passed away in the fall. She had pre-paid for her funeral. She lived longer than the funeral home had anticipated and billed the family for more money. I do not think that I would have been inclined to pay it.</p>
<p>If one is to go on Medicaid, there is a cap on assets allowed for eligibility. If one is not cremated, but buried with traditional services and perhaps a wake, including casket, burial plot, liners for the ground required by many cemeteries, prep and transportation of the body, headstones, etc., then these expenses in many locations would exceed what one about to go on Medicaid can legally have in their name, driving the decision to pre-pay so that it is not a burden to others. (I am not sure if one is allowed to pre-pay headstones/markers with a pre-Medicaid trust.) These trusts are interest bearing, often portable and are done routinely by funeral homes that are well versed in the regulations. Discussing the profits involved is beyond my scope here. It is worth conferring with experts so one is not blind-sided by costs or regulations when trying to honor what the relative would want. </p>
<p>MD Mom- I would not be apt to pay that either. Also seems like a bad business move to ask.</p>
<p>Funeral costs are permitted use of money for Medicaid depended people so if you are going to be placing someone in a Medicaid paid for nursing home, set up funds for a funeral out of current funds.</p>
<p>It sounds as if a number of you have done this, without fear of being cheated by the funeral home. This is my brother’s fear, that the funeral home could disappear with the funds, and thus is a risky investment. </p>
<p>Yes, googling, I found out about the funeral trust problem in Wisconsin, my current state of residence. Never heard of it previouly. I paid for a funeral trust for my friend, as her POA, here in Wisconsin. No problem and it all worked as planned when she passed away last summer. The amount allowed to be set aside for a funeral rather impressed me! This was a spend down situation. </p>
<p>MD mom, that is an awful situation. The Arizona funeral home I spoke with assured me that this was the last money to be spent, and if dying out of the area, they’d make arrangements for cremation out of area at no additional cost. The price lock feature of pre pay is exactly why my mom wants to do this. </p>
<p>Will have to look into final expense insurance. </p>
<p>Maybe prepay is worth the risk, and the amount of money is not large. DMD, I’ll go for the price in Portland! We were quoted far more in AZ.</p>
<p>A variation of this, we bought insurance to return the body of the loved one back to HI upon death, since we and he wanted his services and body in HI. He had a full funeral in HI, with open casket and a lunch afterwards for all attendees. He was not on Medicaid, so there was no spending down and no irrevocable trust, only a revocable living trust during his lifetime.</p>
<p>It was much more reasonable to purchase the policy than pay the expenses of flying a body if we didn’t have the insurance. You had to meet certain conditions to be eligible to purchase the policy.</p>