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Advance Funeral Planning
The subject of funerals is never an easy topic to discuss. Advance funeral planning can be a positive, worthwhile experience in light of the impact your death will have on those you love most. There are many decisions that need to be made for a funeral and burial…part of a seemingly endless number of things that need attention by your family at time of death. When you plan your funeral in advance, you will not only plan a funeral that will reflect your wishes and desires, but most importantly, you will spare the emotional and financial burden of planning a funeral from your family.
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There are various methods available for planning and/or funding advanced funeral arrangements. Listed below are just a few.
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- Assignment of Life Insurance Policies
The death benefit amount of a life insurance policy can be assigned to a funeral home to fund funeral arrangements that are made in advance. At time of death, the proceeds of the assigned life insurance policy will be paid directly to the funeral home and will be applied toward the balance of the funeral costs. This type of advance funeral planning does not secure the funeral contract price at the time of the advanced funeral arrangement. At time of death, all price increases that may have occurred from the date of the advanced funeral arrangement will be added to the total cost of the funeral. When the death benefit proceeds are received from the assigned life insurance poli(cies), they will be applied to the total funeral balance. If there is an excess of proceeds, that amount will be given back to the designated family member or to the estate of the deceased. The designated family member will be responsible for paying the difference if the proceeds are less than the total amount of the funeral contract balance.
One advantage of selecting this type of advance funeral funding is in the case of the required asset reduction when applying for Medicaid. All life insurance policies with a value of $1,500.00 or more need to be taken out of the purchaser’s name to meet the required asset reductions when applying for Medicaid. When the insurance policies are assigned to a funeral home, the funeral home becomes trustee of the policies. Thus the policies will no longer be considered an asset of the individual applying for Medicaid.
- Bank Trust Account
If a bank trust account is chosen for funding an advance funeral arrangement, all or part of the total cost of the funeral can be put into an interest-bearing bank trust account. If only part of the funds of the total funeral contract balance are deposited into the trust account, additional payments toward the total contract balance can be deposited at any time, in any amount. At the time of death, the balance of the bank trust account will be withdrawn, including interest, and will be applied to the total cost (at current price) of the funeral. If there is an excess of proceeds, that amount will be given back to the designated family member or the estate of the deceased.
One advantage to this type of funding is that it allows an individual to select an affordable payment schedule when only part of the total contract amount is deposited into the trust account. Another advantage is when the full price of an advance funeral contract amount is placed in a trust account. The principle amount plus interest should increase more than the amount of the funeral contract balance, with the excess funds normally being returned to the designated family member. It is important for the purchaser to know the funeral home’s policy on excess funds at time of death before signing an advance funeral contract.
Our policy at Cavin-Cook funeral Home requires the amount in excess of the current total contract amount to be returned to the designated family member with no additional fees. If the proceeds are less than the total amount of the funeral contract balance, then the designated family member will be responsible for paying the difference.
- Advance Funeral Insurance Policy
Insurance policies purchased for funding advance funeral arrangements are most commonly either a single premium insurance policy, where the total amount of the advance funeral contract is paid at signing, or a premium insurance policy, which has a specified amount and payment period selected by the purchaser.
The advantage of having either a single or monthly premium insurance policy is that both are inflation-proof. This means that even if the cost of the contracted funeral amount increases in the future, the insurance company will pay all guaranteed price increases, not the purchaser.
The main advantage of this type of funding is that after the total contract amount is paid, the insurance company pays any and all future guaranteed price increases that may occur.
It is important for the purchaser to remember that, like all other life insurance products, the individual applying for insurance will have to be approved by the particular insurance company before the advance funeral plan is finalized.
- Medicaid & Advance
Funeral Planning
With health care costs rising at an alarming rate, Medicaid is becoming a more widely used program for those who need help in paying medical bills. Medicaid is a government health program for low-income residents who cannot afford the cost of health care. To be eligible, a person must meet several requirements, including certain income and asset limits.
To meet the income and asset limits, a person has to normally reduce his or her assets to the amount of $1,500.00. Funding an advance funeral plan is an approved method of reducing assets to help meet requirements for Medicaid. Assets include cash, stocks and bonds, checking and saving accounts, and the cash value of life insurance policies when the face value of the policy is over $1,500.00.
Cash and the cash value of life insurance policies are two of the primary ways to fund an advance funeral plan. When either payment method is used, an irrevocable funeral contract is issued. An irrevocable funeral contract states that all funds used to fund the advanced funeral plan will be used only for the funeral expenses of the purchaser. Since the funeral contract is irrevocable, this makes the contracting funeral home the trustee of those funds. Therefore, Medicaid will no longer consider those funds assets of the purchaser. A copy of the irrevocable funeral contract is then given to the Medicaid counselor with all other required paperwork at the time of application.
Please contact your local Medicaid office for more information concerning advance funeral planning and Medicaid.
- Advance Funeral Planning Without Funding
If you choose not to fund your advance funeral plan, you can simply have all of your funeral arrangements held on file at the funeral home at no cost. At time of death, the designated family member(s) will be responsible for the full cost of the funeral.
PLEASE NOTE: Any type of advance funeral plan, funded or non-funded, can be transferred from one funeral home to another if the need arises (such as relocation, etc.)
REQUIRED ADMINISTRATVIE FEE
The state regulatory agency requires that an administrative fee be paid for all funded advance funeral plans. The funeral home will ask the purchaser for a separate check in the amount of $20.00, made payable to the NCBMS (North Carolina Board of Mortuary Science). This is an administrative recording fee, which in part is placed in a recovery fund used to secure your funds from any future loss. Within 30 days, the purchaser will receive a letter acknowledging that the North Carolina Board of Mortuary Science has received the copy of the funeral contract and administrative recording fee.
MORE INFORMATION ON ADVANCE FUNERAL PLANNING
Making any kind of funeral arrangements involves many choices and decisions. We encourage everyone to consider all of the options and take the time to ask questions before making a final decision.
Our staff at Cavin-Cook Funeral Home is here to make your experience as emotionally satisfying as possible. Making an informed decision can help assure peace of mind for everyone involved.
Please let us know of your personal preferences and wishes regarding your funeral service by visiting our staff personally at our funeral home or by completing our Advance Funeral Planning form.
If you have questions about advance funeral planning or need more information, please call us at 704-664-3363 or email to cavinfh@aol.com
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P.O. Box 977 / 494 East Plaza Drive, Mooresville, North Carolina 28115