LIFE PLANNING NEWSLETTER
LAW OFFICES OF EDWIN B. ZASLOW November 15, 1996


PREPAID FUNERAL CONTRACTS

What Are Prepaid Funeral Contracts?

In the last twenty years, Prepaid Funeral Contracts have become very popular. Under Florida Law, a Prepaid Funeral Contract is simply a financing arrangement any person may enter into with a funeral home or cemetery company. It is not an actual purchase of goods or service in advance of a person's death. Anyone can purchase such a contract: You can buy one for yourself, your spouse or anyone else. If you want to buy one for someone else, you don't even need the other person's permission first. Some people will even buy one and give it to another person as a gift.



Anyone who is thinking of buying a Prepaid Funeral Contract should understand the basic nature of this contract. By signing such a contract, you are not locking in or directing your particular funeral arrangements. Under Florida Law, your next-of-kin has the legal right to decide what your funeral arrangements are going to be: You do not have this right. Anything you put in your Last Will directing your funeral are not legally binding on your heirs or personal representative. So, if you direct in your Last Will that you be cremated, for example, your next-of-kin can ignore this direction completely. Your legal rights end at your death, including any rights you may have to personal autonomy.



We suggest that you speak with your close relatives and tell them your feelings on this subject. You can ask them to commit themselves to carry out your wishes regarding your funeral arrangements.



What Does a Prepaid Funeral Contract Do?

When you sign the contract, the provider agrees that it will provide funeral services and/or goods at a set price when needed. You pay a certain price based on the services and goods you specify. Your next-of-kin, however, is not stuck with the services/goods you specify in the contract: he or she can buy anything that is on the provider's list of goods/services at the time of need. The key feature of the prepaid funeral contract is the price lock-in. So, if the provider's prices go up after you sign the contract, your next-of-kin still gets the old lower price for the pre-paid services and goods. This is referred to in the industry as price lock-in or price protection. Some providers even discount their prepaid prices over their at-need prices as an additional incentive.



Are These Contracts Refundable?

Yes and No.. Under Florida Law, you can cancel the contract within thirty days and get a full refund. After that, only any unused services must be 100% refundable-goods purchased preneed are generally not refundable. You and the provider might agree to make everything 100% refundable and some providers say that their plans are 100% refundable for both goods and services. What are goods? Caskets, vaults, urns, etc. Services are things like embalming, cremation, ritual immersion, etc. Buying interment rights in a cemetery plot non-refundable, except within thirty days of signing the contract. You may normally re-sell interment rights (funeral plots), but the market for re-sales is limited. Cemetery companies will contract for services like opening and closing of plots on a prepaid basis. Like any other service, this should be 100% refundable. You should remember that any refund you or your next-of-kin might receive does not include any interest on your money. The provider always gets to keep the interest.



Who Should Buy a Prepaid Contract?

A decision you might make to buy or not to buy a Prepaid Funeral Contract could be based primarily on financial considerations. You could ask yourself if the deal makes sense versus an alternative investment. If you are young and in good health, you might consider setting up a certificate of deposit as a "burial account." That way you would get the interest on the money over the years. At a certain point, however, you might want to buy a prepaid contract based on the benefit of "price lock-in" and/or any discounts over at-need rates. Many folks also buy a prepaid funeral contract as a way of telling their next-of-kin what arrangements they want. Others may want such contracts to relieve their relatives of the burden choose funeral arrangements. All of these are valid concerns. Then there are Medicaid considerations for folks who are in a nursing homes or may have to go into one.



Are Prepaid Contracts Useful for Medicaid Planning?

If you are in a nursing home or may be going into one, you should know that Medicare usually does not pay for nursing homes. So, the very high cost of nursing homes can wipe out your life savings. Once you have spent down your assets, Medicaid will take over and pay for the nursing home. However, the value of your prepaid funeral contract is an unlimited exempt asset for Medicaid qualification so long as you make the contract non-refundable. So, it may be advisable for such persons to purchase prepaid funeral contracts. The only catch is these contracts must be made irrevocable in this special case by use of a special trust agreement. Because of these considerations, we often recommend such contracts when we are helping folks plan for Medicaid qualification.



How Safe is My Money in a Prepaid Funeral Contract?

Providers of Prepaid Funeral Contracts are regulated by Florida Statutes and must have a license to sell such contracts. Generally, the law requires providers to deposit prepaid funds into trust accounts. The accounts are with banks or savings and loans authorized to act as trustees in Florida. Providers may only withdraw money from such trust accounts after providing the services/goods specified. The State of Florida also maintains a Preneed Funeral Contract Consumer Protection Trust Fund.



How to Find Out More About Prepaid Funeral Contracts.

We keep on file information about most Dade County funeral homes and cemetery companies, including sample contracts and price lists. Feel free to call us if you need additional information. Our number is 305-274-7410.



EDWIN B. ZASLOW, ESQ.

Board Certified Wills, Trusts and Estates Lawyer

LAW OFFICES OF EDWIN B. ZASLOW, LLC

Gables One Tower-Suite 450

Coral Gables, FL 33146

Telephone: (305) 669-5262

Fax: (305) 666-0010