Peace of Mind, Personal Choices, and Financial Security
osing a loved one is always difficult and emotional. At this stressful time, family members are suddenly forced to make many important decisions alone. Experiencing a death, along with the need and want to make good decisions within a short period of time, may leave families feeling overwhelmed. This is only one reason why it may be important for families to consider planning their funeral ahead of time. Many have also found that setting aside final expenses ahead of time, gives them comfort in knowing that their families will have less emotional stress while grieving their loss. Pre-planning allows a family to confer with their loved ones and to make plans together. Throughout our lives, we plan for many things—a wedding, a new home, the children’s college tuition, vacations, and retirement. We all want to protect our families and make sure that important events are planned for and that the correct financial choices have been made. Prearrangement is just another one of life’s important decisions. Preplanning today will:
~Ease your family’s emotional stress at a difficult time, ~Help your loved ones avoid difficult decision-making at the time of death, ~Ensure that your wishes will be followed and, ~Will help a loved one with unnecessary financial burden. To answer specific questions you may have about pre-planning, we have provided a list of Frequently Asked Questions below. For more information, or to receive a printed free guide to pre-planning, please visit with our staff. Together, we can help assist you with these important decisions that will ultimately affect those you love.
Frequently Asked Questions About Pre-planning
hy do people pre-plan their funerals? Making provisions for one's death should not be considered morbid or fatalistic. That's why wills are made, inheritances arranged, estates planned. It is no less appropriate to pre-arrange some or all of the details surrounding your death. It is important to recognize that death often places unanticipated burdens on survivors. Without advance guidance, the surviving family spouse or children may not know the right or "expected" thing to do. Making arrangements in advance may lessen survivors' burdens at a difficult time and ensure that your wishes will be carried out. At the same time, a pre-arranged funeral should not be forced upon anyone; it's always a matter of individual choice. Pre-arranging your funeral should be done with the same care and consideration that you used when writing your will, planning your wedding, or buying your home. What common mistakes do people make when pre-planning? The most common mistake that people make is failing to get the advice of a funeral professional. Many people are afraid to talk to a funeral professional because they are not comfortable talking about their own mortality. Friends, family, and other professionals are important sources of information, but as with most things, the best advice comes from those who work in their area of expertise every day. Failing to discuss their plans with their loved ones is another common mistake. As a rule, funeral planning should not exclude loved ones whether the planning is done in advance or at the time of death. Assisting in the funeral planning process helps loved ones come to terms with the realities of death in a healthy and natural manner. Many people assume that by planning ahead to skip the funeral process, it allows families to skip the grieving process. Nothing could be further from the truth. The purpose of the funeral, which can be as conventional or unconventional as you prefer, is to allow the survivors a time and place to grieve their loss. Should I involve my family in the pre-arrangement process? Yes, by all means. Consider the wishes and feelings of the family. Frequently an honest desire to spare survivors of the "painful" task of making funeral arrangements has a reverse impact because loved ones are removed from the process. Instead, permit loved one when possible to be active participants in the pre-arrangement process. However, do not force your family into any discomfort they may feel as a result of making pre-arrangements. Whose needs do I consider when planning my funeral? My family's or mine? Funerals are for the survivors. The funeral serves as on-going testimony that a life has been lived. It serves as a last act of recognition, honor, respect, and reunion of heartfelt memories. It is also a gathering of social significance. Publicly, love is both expressed and received. The funeral serves the survivors emotional needs; expressing grief is one of those needs. The advantage of involving loved ones in pre-arranging also brings the formerly "taboo" subject of death into the open. Planning ahead with family helps ensure that the funeral will be meaningful to the participants, while still reflecting your individual preferences. Will my pre-arrangements be followed? When possible, yes. However, pre-arranging does not absolutely guarantee that all arrangements will in fact be carried out as planned. There is no advance way of knowing exactly when, where, how, and under what circumstances death will come, or what services or merchandise will be available in the future. These unknown factors can alter original plans. Still, pre-arranging a funeral is a sound tentative plan that will be carried out to the fullest extent possible as allowed by law. Minnesota law states clearly that you have the right to control your own final disposition, pursuant to MN Statute 149A.80. What happens if the merchandise that I pre-paid is not available at the time of my death? State law (MN Statute 149A.97 (11)) says the funeral provider must provide goods and services similar in style and at least equal in quality. The person responsible for arranging the funeral has the right to choose the goods or services to be substituted. Do funeral directors charge for making pre-arrangements? No. Minnesota Law says that 100% of the pre-arrangement funds must be placed into trust. No finance charges are allowed on pre-need arrangements either. What is the difference between a Revocable and an Irrevocable pre-arrangement? The revocability of your plan refers to the pre-funding of your funeral. A revocable plan allows you to un-fund your pre-arrangement at any time and spend the money as you wish. If your revocable pre-arrangement was funded with a bank trust, your principal plus all interest will be refunded to you. If your revocable pre-arrangement was funded with an insurance policy or annuity, the cash surrender value, less surrender charges, will be returned to you. Most people choose to make their pre-funding irrevocable because they want to do what they can to ensure that the money will be there to pay for their funeral in the future. Irrevocable funds cannot be withdrawn for any reason prior to the death of the person for whom the pre-arrangement was made. Whom do I contact? Advice of a funeral professional is absolutely essential. No one else is equipped, by experience and training, to give you a thorough understanding of all facets of pre-arranging. A funeral professional is well versed in all types of funerals, and is knowledgeable about the laws regarding funerals and final disposition, trusts, insurance and Medical Assistance pre-funding rules. Irrevocability protects your funds from bankruptcy, lawsuits, and unscrupulous individuals, powers of attorney, or conservators. Irrevocability also gives you the maximum exemption for your funds if you are applying for Medical Assistance or other forms of public assistance.
Frequently Asked Questions About Pre-funding
hy do people pre-fund their funerals?Nationally and in Minnesota, pre-payment (pre-funding) of a portion or all funeral costs is a growing trend. There are both emotional and financial benefits to pre-funding. The facts that we are mortal and that funerals cost money should not surprise anyone. Yet, funeral professionals meet daily with next of kin who are not prepared to deal with the financial impact of a loved one dying. Indeed, the funeral establishment's charges are important to consider and plan for, but many people fail to plan adequately for all the other expenses involved with a loved one dying. For example, there are cemetery expenses, marker or monument expenses, and travel and lodging expenses. There are also expenses for flowers, food, music, obituaries, and other items. All these expenses occur at a time when the decedent's income has stopped and life insurance benefits are not yet paid. Many people say they feel better after they've completed their pre-arrangements, knowing this burden has been removed from their loved ones. What common mistakes do people make when pre-funding?
The most common mistake people make when pre-funding their funeral is failing to follow through. Most people would agree that it is a good idea to ensure that this inevitable expense is taken care of. Yet, many of the people who get started with the process fail to act on pre-funding until it is too late. Medical problems that are common with advancing age can erode one's finances and affect one's eligibility for a complete slate of pre-funding options. Handling the pre-funding without the help of a funeral professional is another common mistake. The law is very clear about what constitutes a pre-paid funeral plan. Attempting to finding ways to pre-fund a funeral without the help of a funeral professional can lead to the worst-case scenario: your funds won't be there at the time of your death. So-called burial plans, or final expense plans, typically do not provide to you ALL the benefits and protections that you deserve when planning for your funeral expenses. Why is it important to hold my pre-funded funeral in a trust? Whether you place your prepaid funeral funds in a bank, life insurance policy, or annuity, or utilize an insurance assignment, these funds should be held in a trust. The purpose of a pre-funding trust is to safeguard your funds. A properly structured trust helps to prevent the assets from being liquidated by lawsuits, unscrupulous individuals, or bankruptcy filings. These unfortunate circumstances affect individuals, banks, insurance companies, and funeral establishments. To be most effective, the trust should be set up irrevocably. Only your funeral professional has the tools and the expertise to set up your funeral trust properly. Who selects the funding vehicle for pre-arranged funeral? By law (MN Statute 149A.97 Subd. 3a(4)), your funeral provider must disclose to you that pre-funding options include both funeral trusts and pre-need insurance policies. However, your funeral provider is not required to hold an insurance license. Your funeral provider may offer a guaranteed price or offer only with funding vehicles that they have researched, since the funeral provider wants what you want: adequate funds to cover the present and future costs. What happens to the funds? In the case of funeral trusts, the money goes into an interest-bearing, government backed account in your name at a bank, savings and loan associations, or credit union. The interest is taxable to you. The financial institution issues IRS Form 1099 to you at the end of each year. In the case of "pre-need insurance," you purchase a life insurance policy or annuity with a face value sufficient to pay for the funeral. Such a policy should be an increasing benefit ("growth") policy, so the death benefit grows to keep pace with inflation, just as the interest on a funeral trust will grow to counter inflation. The growth on a life insurance policy typically is tax-free, and the growth on an annuity policy is generally tax-deferred. Do I have to pre-fund when I pre-plan? No. You may pre-plan without pre-funding, or pre-fund without pre-planning. Your funeral provider will work with you to pre-plan your funeral to the level of detail that you wish. You may choose to pre-fund your plans fully, partially, or not at all. Your funeral provider will also explain how your choices may influence your eligibility for Medical Assistance or other programs. Do I have to pay all at once? No. You may spread your payments out over time. If you choose to pre-fund using a bank trust or a flexible or fixed annuity, your estate or next of kin will be responsible for the balance if you die before your plan is fully funded. Price guarantees, if any, typically will become effective when your plan is fully funded. If you are young and healthy enough to qualify for a fully insured pre-need life insurance policy, the insurance company will pay the balance due, and any price guarantees are effective immediately. What is the difference between a Revocable and an Irrevocable pre-arrangement? The revocability of your plan refers to the pre-funding of your funeral. A revocable plan allows you to un-fund your pre-arrangement at any time and spend the money as you wish. If your revocable pre-arrangement was funded with a bank trust, your principal plus all interest will be refunded to you. If your revocable pre-arrangement was funded with an insurance policy or annuity, the cash surrender value, less surrender charges, will be returned to you. Most people choose to make their pre-funding irrevocable because they want to do what they can to ensure that the money will be there to pay for their funeral in the future. Irrevocable funds cannot be withdrawn for any reason prior to the death of the person for whom the pre-arrangement was made. Irrevocability protects your funds from bankruptcy, lawsuits, and unscrupulous individuals, powers of attorney, or conservators. Irrevocability also gives you the maximum exemption for your funds if you are applying for Medical Assistance or other forms of public assistance. What about going on Public Assistance? Public assistance laws change periodically, but they typically take into account that at least some, if not all, funeral expenses may be pre-paid. Determining which rules apply depends upon which public assistance program you are applying to (Medical Assistance, SSI, General Assistance, etc.) and your particular circumstances. To receive the maximum exemption, careful consideration needs to be given to the type of pre-funding mechanism that is selected. Particular attention needs to be paid to the timing of the pre-funding and to the exact circumstances of the applicant so as not to disqualify the applicant from public assistance programs. Your funeral professional can expertly guide you through this process.