Prepaid Funeral Plans: Who Tells the Funeral Home You Died?

Prepaid plans are usually sold as a way to spare your family. If you have no family, the real question is who makes the first call.

Who will tell the funeral home you died

The funeral home doesn't hear about your death from the hospital or the state. It hears from whoever calls it. If nobody knows you have a contract, the arrangements can get made without it.

A prepaid plan also doesn't give anyone authority over your body. That comes from separate paperwork: a will naming an executor, or a form naming a funeral agent, depending on your state.

California helps a little. Its law makes the funeral home show the contract to whoever is handling the funeral, with fines for a home that knowingly fails to. That works only if the right person walks in the door. So name them, and tell them.

The prepaid plan is one line on the whole checklist. This page covers that line.

What to give your person, and where to keep it

Hand this over in person or by mail. Don't leave it only in a drawer at home, where nobody can get to it in time.

• The provider's full legal name, address, and license number
• The contract number and a full copy of the contract
• The trust company or insurer, plus the policy or account number
• Every payment receipt
• Your written wishes: burial or cremation, service or none, where the ashes go
• A note on where your originals are kept, outside your home

Receipts matter more than they look. If a seller fails, buyers in Illinois, Ohio, and North Carolina can claim from a state recovery fund, and proof of payment is what you'll be asked for.

Do you need to prepay at all?

The Funeral Consumers Alliance, a consumer group, advises planning without prepaying unless you're spending down for Medicaid. It suggests a payable-on-death account instead: a bank account that goes to the person you name when you die. It specifically doesn't recommend naming a funeral director as that person.

I'd plan without prepaying unless Medicaid spend-down is in the picture. A payable-on-death account keeps the money yours, lets you move, and puts it straight into the hands of the person who'll do the job. If Medicaid is a factor, your state's Medicaid office or an elder law attorney can confirm what's right for you.

If you do prepay, the FTC's Funeral Rule still applies. Ask for the General Price List and an itemized statement of what you're buying before you pay. Veterans should check what veterans burial benefits already cover. The pre-planning guide walks through doing it without paying ahead.

Trust or insurance: how the money is held

A trust-funded plan puts your payments in a trust or escrow account. An insurance-funded plan buys a policy that pays the funeral home when you die. States set different rules for how much has to go into trust.

With insurance, you're signing two contracts: the funeral contract and the policy. The Texas Department of Banking warns that the policy's cash surrender value is "most often less than your total payments." Canceling the funeral contract doesn't cancel the policy on its own.

Questions to get answered in writing before you sign

New York's health department publishes a plain guide, Before Prepaying Your Funeral, Know Your Rights. Wherever you live, get these answers on paper.

• Is this trust-funded or insurance-funded?
• Is it revocable (can I cancel it)? What do I get back if I do?
• Which prices are guaranteed, and which are only estimates?
• Who gets any money left over after the funeral?
• What happens if I move?
• What happens if you close or sell the business?
• Who can cancel for me if I can't?
• Can the contract name the person you'll deal with when I die?

What happens if the funeral home closes

Protection depends on your state, and some states have very little.

That gap in Pennsylvania and Michigan is unfair to anyone buying on their own. There's no relative checking on the seller for you, and no fund behind you if the money goes missing. Keep your receipts and ask for a statement from the trust or escrow agent.

Complaints go to your state's funeral regulator. In Illinois that's the Comptroller's office; in Michigan, the Department of Licensing and Regulatory Affairs.

What moves with you if you move

Some states let the money follow you. Fewer make the old price follow you.

• New York: with an irrevocable contract, you can switch to another funeral firm, and the move must happen within 10 business days of your request.
• Texas: a trust contract can't be transferred, but you can assign its cancellation value to a new provider. That provider doesn't have to honor your old prices, per the Texas Department of Banking's prepaid funeral brochure.
• North Carolina: you can "direct the substitution of a different funeral establishment," and the bank pays the new one.
• Michigan: the seller "shall assign" an irrevocable contract to another provider on your written request.
• Ohio: transfers are allowed, with a fee of up to 10% on guaranteed-price contracts.
• Illinois: reassignment is confirmed only for insurance-funded irrevocable plans.

Where leftover money goes when you have no heirs

If the plan holds more than the funeral costs, someone gets the difference. In New York, a Medicaid irrevocable contract must say in plain capitals that leftover money "will go to the county." Other states have their own rules, covered in who pays.

The fix is the same everywhere. Buy an itemized plan without padding, and ask in writing who receives any leftover. Then make sure your will covers it.

Getting your money back

Refunds on a revocable trust plan vary widely. Illinois returns 95% (85% for burial containers) plus net earnings on a paid-up plan. Ohio returns trust assets minus a fee of up to 10% on guaranteed-price contracts, and gives you seven days to cancel free. North Carolina refunds what the bank holds, not the 10% the seller kept. Michigan returns 90% to 100% of the escrow balance, depending on the commission.

Texas returns about 90% of a paid-up trust plan plus half the earnings. Pennsylvania's law and regulations have no refund rule at all. Insurance-funded plans pay the surrender value. Details are in cancel a prepaid plan.

Prepaid plans and Medicaid

Medicaid spend-down is the one case where prepaying often makes sense, because an irrevocable contract (one you can't cancel) can be left out of your countable assets. New York only allows irrevocable contracts for Medicaid or SSI applicants. Limits differ by state, so check with an elder-law attorney before you sign. The Medicaid rules guide has the state details.

In Canada

Ontario does something no US state we checked does. Under Ontario Regulation 30/11, section 144, you can name in the contract the person who may cancel it and receive the refund. For a buyer on their own, that's your person written into the deal itself. Check the current wording with the Bereavement Authority of Ontario before you rely on it.

Ontario also gives a full refund within 30 days of the contract taking effect. After that, the fee is the lesser of 10% and C$350. Other provinces set their own rules; ask your provincial funeral regulator, an estate lawyer, or in Quebec, a notary.

What to set up next

• Funeral agent: the person who makes the call and has the authority to act.
• Cancel a prepaid plan: refund amounts by state, in full.
• Medicaid rules: state caps and where leftover money goes.
• Pre-planning: plan it all without paying ahead.

More in end-of-life guides.