2011-08-03 “Pre-Arranging Part 2”

Last week I wrote about pre-planning a Funeral Service for yourself or for someone whose affairs you have been entrusted with.  I ended it with the statement that there is no obligation to pre-pay your funeral expenses but that there are some advantages if you do. 

The benefit of pre-paying funeral expenses is that your executors will not have to pay any additional money for the services that have been guaranteed.  This is how it works:  if I prepay my funeral today, that money will be invested.  If I die in twenty years, the Funeral Home would figure out what the cost of the same services are at that time.  Theoretically there will be enough money plus interest to cover the cost of the services at that time.  If there’s not enough to cover the costs, then the Funeral Home will absorb the loss.  If there is too much money, then my estate will be entitled to the difference.  And as long as the invested money is used to pay funeral expenses, the interest that has been earned is not subject to income tax. 

There are different types of investments that we offer at the Blenheim Community Funeral Home.  And it’s important to note that the money you invest does not get paid to the Funeral Home until after the person for whom the pre-arrangement is for has died.  If you were to choose that your money would be placed into a trust fund or into an annuity, that money remains your money and if you ever choose to withdrawl your pre-arrangement, the original deposit plus all of the interest that it has accumulated would be returned to you.  Another choice that you have would be to purchase insurance to cover your funeral expenses.  However, if you were to cash in an insurance policy ahead of time then you would receive a cash value which may be less than what you paid.  I will explain more of these points in the next couple of weeks.