February 5, 2024
With the funeral cost averaging between $7,000 and $12,000 and steadily increasing each year, at the very least, your estate plan
should include enough money to cover this final expense. Although you can leave money in your will to pay for your funeral
expenses, your family won’t be able to access those funds until your estate goes through the court process of probate, which can
last months or even years. And since most funeral providers require full payment upfront, your family will likely have to cover
your funeral costs out of pocket. Moreover, your loved ones will have to deal with all of this while grieving your death.
If you want to avoid burdening your family with such a hefty bill and the stress that comes with it, you need to use estate
planning strategies that do not require probate. While you should meet with us, your Personal Family Lawyer ® , to find the
solution best suited for your unique situation, the following five options are among the most used methods for covering funeral
expenses without the necessity for probate.
01 | TRADITIONAL INSURANCE
You can purchase a new life insurance policy or add extra coverage to your existing policy to cover funeral expenses. Unlike
money left in your will, an insurance policy does not go through probate, and it will pay the death benefit to the named
beneficiary as soon as your death certificate is filed with the insurance company. This way, your children can have funds readily
available to them to pay for the cost.
02 | BURIAL INSURANCE
In addition to traditional insurance, you can purchase burial insurance to cover funeral expenses. Also known as “final
expense,” “memorial,” and “preneed” insurance, such policies do not require a medical exam. However, you’ll often pay
far more in premiums than the policy pays out.
In fact, due to the hefty premiums and the fact such policies are sold mostly to the poor and uneducated, consumer advocate
groups like the Consumer Federation of America consider burial insurance a bad idea and even predatory in some cases because
these policies are often sold to lower-income populations.
One final point about using insurance to pay for your funeral: If you have any insurance to cover your funeral, your family must
know about it. Far too often, insurance policies are never cashed in because the family didn’t know they existed. Don’t let this
happen to you—make sure your family knows about any insurance policies you have and how to locate the necessary paperwork.
03 | PREPAID FUNERAL PLANS
Many funeral homes let you pay for your funeral services in advance, either in a single lump sum or through installments. Also
known as pre-need plans, the funeral provider typically puts your money in a trust that pays out upon your death or buys a burial
insurance policy, with itself as the beneficiary.
While prepaid plans may seem convenient to cover your funeral expenses, these plans can have serious drawbacks. As mentioned
earlier, if the funeral provider buys burial insurance, you’ll likely see massive premiums compared to what the plan pays out. And
if they use a trust, the plan might not actually cover the full cost of the funeral, leaving your family on the hook for the difference.
Plus, most states have inadequate laws protecting funds in such plans, putting your money at risk if the funeral provider closes or
is bought out by another company.
These plans are considered so risky the Funeral Consumers Alliance (FCA), a nonprofit industry watchdog group, advises against
purchasing such plans. The only instance where prepaid plans are a good idea, according to the FCA, is if you face a Medicaid
spend down before going into a nursing home. This is because prepaid funeral plans funded through irrevocable trusts are not
considered a countable asset for Medicaid eligibility purposes.
That said, if you want to buy a prepaid funeral plan to qualify for Medicaid, consult us first. Not all prepaid funeral plans are
Medicaid compliant, even if the funeral home says they are. Moreover, if the irrevocable trust is not set up correctly, it may
violate Medicaid’s look-back period, which can delay your eligibility for benefits.
04 | PAYABLE-ON-DEATH ACCOUNTS
Many banks offer payable-on-death (POD) accounts, sometimes called Totten Trusts, that you can set up to fund your funeral
expenses. The account’s named beneficiary can only access the money upon your death, but you can deposit or withdraw money
at any time.
A POD account does not go through probate, so the beneficiary can access the money once your death certificate is issued. POD
accounts are FDIC-insured, but such accounts are treated as countable assets by Medicaid, and the interest is subject to income
tax.
Another option is to open a joint savings account with the person handling your funeral expenses and give them rights of
survivorship. However, this gives the person access to your money while you’re alive, which puts your money at risk if the person
goes into debt or gets sued and their creditors come after your account to pay the other person’s debt.
Given this risk, we recommend you consider other options allowing you to pay your funeral expenses without leaving your
finances vulnerable to another person’s mistakes or poor money management.
05 | LIVING TRUSTS
When you work with us as your Personal Family Lawyer®, you don’t need to buy a pre-built trust from a funeral provider.
Instead, we can create a customized living trust that allows you to control the funds until your death and name a successor trustee
who is legally bound to use the trust funds to pay for your funeral expenses exactly as the trust terms stipulate.
Furthermore, you can change the terms of your living trust at any time and even dissolve the trust if you need the money for
other purposes. Alternatively, if you need an irrevocable trust to help qualify for Medicaid, we can create that type of trust while
ensuring the trust stays compliant with all of Medicaid’s requirements, so you don’t run afoul of the program’s many complex
requirements.
If you want to create a trust to cover your funeral expenses, meet with us, your Personal Family Lawyer® to discuss the options
best suited for your intended purpose, budget, and family situation.
USE ESTATE PLANNING TO AVOID BURDENING YOUR FAMILY
Although thinking about your eventual death is never easy, with the proper planning, you can make dealing with the aftermath
of your death significantly easier for the loved ones you leave behind. To avoid needlessly burdening your family with the expense
and stress of planning and paying for your funeral, make sure your estate plan includes the necessary funds to cover this expense
and be sure to use an estate planning strategy that will allow your family to access these funds as quickly and easily as
possible—ideally by using an option that avoids probate.
With so many different options, please consult with us, your Personal Family Lawyer® to find an estate planning vehicle best
suited for your particular situation. With our guidance and support, we will develop a planning strategy that includes adequate
funding to ensure your funeral services are handled exactly as you desire—and your family won’t be forced to foot the bill.
Contact us today to learn more.
Your Estate Planning journey begins with us by scheduling a Family Wealth Planning Session. During this two-hour
meeting, you will meet with an attorney to explain how an Estate Plan can benefit you and the ones you leave behind.
Schedule your Family Wealth Planning Session today by calling us at 208-733-7200 or by clicking the link here.
This article is provided as a service of Twin Falls Estate Planning, Personal Family Lawyers®. We do not just draft
documents; we ensure you make informed and empowered decisions about life and death for yourself and the people
you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially
organized than you’ve ever been before and make all the best choices for the people you love.
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