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Are prepaid funerals a good idea?

On Behalf of | Jan 10, 2022 | Estate planning

You’ve always been a responsible person, and you consider your estate plans to be the last, loving act that you can do for your family. 

Should you, then, invest in a prepaid funeral and burial (or cremation) plan? It seems like that would take some burdens off your loved ones’ shoulders after your death, but it may not be a good idea. Here are some of the reasons why: 

1. Prepaid plans rarely transfer

Unless you are 100% sure you won’t ever relocate, you could end up losing your investment. Most funeral homes are independent operations, so unless you buy a prepaid plan with a national chain that guarantees reciprocity with their other locations, you could end up with a plan that’s useless to you. 

Even if you are 100% sure you’re never going to relocate, there’s always the possibility that the funeral home you choose will go out of business. If so, you may have no ability to recover those lost funds. 

2. You’re locked into one option

The plans you make today may not suit your desires later. You may come to see funerals and burials as wasteful or morbid and want a quick, private cremation that’s much less expensive. 

Or you may decide you want to donate your body to science, opt for a “green” burial or something else. In any case, that money you spent on your prepaid plan is unlikely to be refunded. 

3. You could put the money to better use

If you put the money you’d pay for a prepaid funeral plan into a bank account, you may not earn a ton of interest – but you will make some. (Plus, you have the security of knowing that your money is insured against a loss.) 

You could also choose to put the money into a higher-yield investment account designed to pay out upon your death. You can earmark that money for your burial expenses, with any remainder going to your heirs.