A pre-need funeral trust is a financial arrangement that allows you to pre-plan and pre-pay for your funeral arrangements so everything will be taken care of when the time comes. This typically involves arranging and paying for all aspects of a funeral or memorial service and making those wishes known for your next of kin before a terminal illness, serious disability or unexpected death occurs.
A pre-need funeral trust allows you to put money for funeral arrangements in an irrevocable burial trust or escrow account. Part of or the entire service and burial are chosen and pre-funded in advance. These types of trusts are not the same as burial insurance, which is money paid to a beneficiary after someone dies.
Why Individuals Pre-Plan Their Funerals and Set Up Trusts
Preplanning a funeral relieves most of the burden placed upon your family when you die. The process involves arranging your service, picking out your funeral products and then paying for it all. Preplanning usually involves deciding on:
- Funeral home and cemetery
- Type of disposition: burial or cremation
- Whether you will have closed or open casket
- What pre-funeral events you will have: visitation, wake, etc.
- Type of funeral service: funeral home, graveside, church or none
- Purchasing cemetery plot, headstone, etc.
While there isn’t a specific time for a person to pre-plan his or her own funeral, there are instances when it just makes sense:
- When a couple marries
- Before a serious surgery
- At retirement age
- When drawing up a will
- When entering a care facility or nursing home
- When one spouse dies
Drawing Up a Pre-Need Funeral Trust
There are many steps to pre-planning a funeral and setting up your pre-need funeral trust. These guidelines can give you some ideas on how the process works:
- Organize your finances: Funerals are not cheap, and many people don’t have enough in their savings to cover the costs. Setting up a funeral trust not only locks in current prices, but it will also give you peace of mind that your loved ones won’t have to shoulder the financial burden when you die. The trust should cover the costs of the burial plot, flowers, grave marker and more. You can typically pay in full or in installments.
- Draw up a will: You can have your final burial arrangements and information about your trust designated in your will. Make sure it is kept in safe place where your next of kin can obtain it.
- Contact a funeral home: Spend some time visiting funeral homes and choose one you are most comfortable with in terms of cost and convenience. A funeral home director should be able to give you all the information you need, as well as help you plan most of the details. A pre-need counselor can also help set up the trust.
- Select a casket or urn: You can choose to be cremated or buried and then designate your final resting place.
- Choose a burial plot: If you wish to be buried in a cemetery or mausoleum, take some time and visit nearby facilities to get an idea of where you would like your final resting place to be. Many states also allow green burials, so you may want to consider that as well.
- Grave marker: This is typically chosen after a person’s death, but if you are pre-planning, then you can choose the style and design of your liking.
Understanding Pre-Need Funeral Contracts and Trusts
An important part in creating a pre-need funeral trust is determining your budget and allocating the appropriate funds to pay for services. A certified pre-need counselor, not necessarily a funeral director, can help you with this. He can design a plan that covers all your needs while guaranteeing a price for your services. This plan is the basis for your contract and trust that outlines the goods, services and merchandise purchased.
You do not need to make every decision up front. Some people select only the casket and plot, while others choose and pay for every part of the funeral service. To receive a price guarantee, the pre-need contract needs to be funded. A funeral trust will then be established and money placed with a third party, such as a trustee who will manage the money and pay designated providers when applicable.
Communication Is Key
It’s important to communicate your wishes to your pre-need counselor and your family regarding your funeral plans and trust. Pre-planning your own funeral can be quite daunting, so take your time and be selective. Contact Grace for more information about pre-need funeral trusts and contracts.