At Advent, although we think it is an excellent idea to record what type of arrangements you prefer, we don’t recommend pre-payment of funeral expenses. Plans and preferences are dynamic – It is easy to change what you have written on paper, but harder to change a financial vehicle. Additionally, when you pre-fund funeral expenses, that money no longer becomes available for your use. The opportunity cost may make pre-funding an unattractive option.
That being said, there are some instances when pre-funding a funeral plan makes sense. If someone lives in a nursing home, it is recommended to pre-pay funeral expenses (those monies are Medicaid exempt if financial assistance from the government is ever requested).
Also, some people feel at ease having “closed that loop.” If you have no close family, putting your arrangements in order is a wise choice. It is also a wise choice if you are worried about burdening your children with significant decisions during a tough time.
Any money that you entrust to a funeral home for future arrangements cannot be kept by the funeral home, rather it is placed in a trust account or insurance policy for your future benefit. These plans are portable (they may be used toward funeral expenses at any funeral home that accepts them) and usually guarantee against future price increases for certain prefunded items.