Trust VS. Insurance

Inflation affects everything. Yes, even funeral costs. Why? Mainly because each year it costs more to do business and if funeral homes did not raise their costs over time, they would not be able to offer their nice facilities, services, and professional staff. At the same time, merchandise manufacturers and cemeteries will increase their costs, and that will affect the total costs as well.

What the funeral industry has seen is that funeral costs will nearly double every 10-12 years with inflation. If you think about it, that pales in comparison to the inflationary costs of homes, automobiles, and many other things.

The fact is that inflation will be a factor in the future cost of a funeral.

But there is something that you can do to control that. You can pay for your funeral costs in advance, and there are several ways to do that.

TRUST: The Pro's

Traditionally the choice of many funeral homes, a trust account would allow for an individual to set aside funds that would cover either a portion of or all of a funeral. Escrow accounts were and are still used in many cases. These accounts will earn interest as the years go on. At the same time, funeral costs continue to nearly double every 10 -12 years. The interest earned in your account will keep pace with inflation and cover the funeral costs in the future. These accounts can also be set-up to be excluded as an asset, should you ever need to apply state assistance in the future for nursing home or long term care.

TRUST: The Con's

In many cases, the interest earned on the account would be taxable each year, and if the funds are held with a state association fund, there may be fees as well. You would either receive a 1099 at the end of the year or in some cases, the tax is taken out of the income earned in the trust for the year. Another thing to consider is many funeral homes will only guarantee costs according to what you deposit. In other words, let's say that you chose a funeral that totaled $7,000.00 and you could only put aside $100.00 a month towards that. Six months into the payments, you pass away. Your family will have to come up with the remaining $6,400.00. Another scenario involves putting down $4,000.00 and not paying anything more. The remaining $3,000.00 would not be protected against inflation.

INSURANCE: The Pro's

There is a light at the end of the tunnel. Insurance products are available to guarantee costs against inflation. These are not your typical term or whole life policies, and not every insurance company offers them. Here's how it works:

Let's take that $7,000.00 figure as illustrated above. With the insurance product, you don't have to pay the entire amount. Depending on your age, there are 3, 5 and 10 year plans which allow you to make a monthly payment towards that $7000.00 and know that if death occurs during that payment period, either all or a good portion of the costs would be paid by the insurance. (Amount depends on your current health) These accounts earn interest just like the trusts, so the funeral costs can be guaranteed against inflation. Many of these accounts are not taxable. They can also be set-up to be excluded as an asset for state assistance, like Medicaid, and many of these accounts come with an interest-free period, in which you can make the monthly premium and at some specified point, make an early payoff payment and pay no more than the total funeral cost. This is wonderful protection and something that many people are now doing.

INSURANCE: The Cons

The only con that some people will tell you is that the account may not earn enough interest to cover the funeral costs in the future, should inflation really take off. That is a concern of only the funeral home offering the product, because they have to absorb any losses from the accounts if that should happen. Be careful though. Some funeral homes do not guarantee their costs against inflation, even if they use these products. There are a lot of concerns that people have when discussing Advanced Funeral Planning and Prepaying. I have addressed those concerns on the commonly asked questions page.

The one fact is that if you don't believe that planning for such a difficult day in your family's life is important, then the benefits of paying in advance will mean nothing to you. As a funeral service professional, I see, on a daily basis, what a family can go through when confronted with the emotional and financial stress of making final arrangements for a loved-one. We believe very strongly in letting people know that there is a way to reduce that burden and there are many options available to you. We would be happy to discuss these issues with you or send you some material to get you started.

The younger you start something like this, the better for you and your family.

Disclaimer: The information contained on this page and all pages is for informational purposes only. Each state, county and region has its own laws, rules and regulations and your individual state agencies should be consulted before making any decisions. These options presented on this website's pages are available through Advanced Funeral Planning in and for the State of Connecticut and may not be available to and for all states. Advanced Funeral Planning, LLC accepts no liability for any arrangements that are made between you and your funeral home.