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Financing Your Funeral: Your Options

Financing Your Funeral: Your Options

Money and Death: for many, these subjects are two of the least favorite topics to talk about. The truth of the matter though is that we will all have to deal with paying for a funeral at some point. The question is how much we’re going to pay and how stressful it will be. Last week we discussed the benefits of taking action now to preplan and prepay for you or your loved one’s funeral. This week, we’ll go over the options available to you and your family so you can make the most informed decision.

Your Options

Not Planning Ahead
While this is technically an option, it obviously is not the most prudent. Leaving the planning and payment to your family and loved ones is a burden that can and should be avoided. If you have reservations about the benefits of planning ahead, make sure to read our article Financing Your Own Funeral: The Benefits.

Personal cash or check
If you prefer to set a certain amount aside into a savings account for your funeral, that is an option that is available to you. Just be aware that it may not be the best option. Aging and sickness can lead to unexpected spending down of the account. In addition, those assets may reduce the ability to qualify for Medicaid. Your money in a savings account is not afforded the same kind of protection that an insurance trust allows. Consider your options before you take this route.

Funeral Trust
The Internal Revenue Service defines a funeral trust as “a ‘pooled income fund’ set up by a funeral home or cemetery to which a person transfers property to cover future funeral and burial costs.” They’re often referred to as “pre-need programs.” This most likely will be your best option for prepaying for a funeral.

The state of Wisconsin and Minnesota have very specific rules that must be followed when it comes to pre-funding funerals. All monies prepaid for funeral/cremation services must be held in trust until services are performed.  That trust must be owned by the individual and the beneficiary of the trust must read “Any funeral home as their interest may appear” this is because WI and MN are 100% transfer states, so the individual can change their choice of funeral home at any time. This gives you and your family the protection and flexibility that you need.

The trust must then be held by an entity that has been approved by the state to offer funeral trusts in the state, and are irrevocable. The irrevocable designation protects the trust when a situation like the need for Medical Assistance arises. This allows another measure of protection for your funds that savings accounts cannot.

You may only deposit the amount needed for the type of funeral/cremation service that you want. This is itemized on the Statement of Funeral Goods and Services.  The trust account/policy will have a guaranteed interest rate (this will vary depending on age) so it will grow to cover the rise in cost (inflation) over time.

Funeral homes have the option of adding a guarantee to the trust. Not all funeral homes guarantee trusts. A NON guaranteed trust means that at the time of death you have the principal and interest of the trust to apply toward the cost of that funeral at the time of need.  It may or may not be sufficient to cover the cost and if it isn’t, the additional cost must be covered by the estate of the family.  A guaranteed trust means that the entire statement of goods and services will be provided at the time of death even if the trust has underperformed inflation.  So if the trust is not sufficient to cover the cost at the time of need, the funeral home covers the additional cost instead of the estate or the family.  In both the guaranteed and NON guaranteed trusts, any unused or excess funds in the trust belong to the estate of the individual. This means you will not waste money if you choose to prepay for your funeral via a trust.

Bakken-Young Funeral & Cremation Services, guarantees fully funded trusts. When you prepay for your funeral with Bakken-Young, you can be sure that your costs will be covered and your family will have this burden taken off their shoulders. Since, 2004, Brian Young of Bakken-Young Funeral, has been a licensed insurance agent for pre-funding funeral trusts. Come see for yourself what his team has to offer you and your family. Don’t be left unprepared!

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