ADVANCE FUNERAL PLANNING AND PRE-NEED CONTRACTS
In recent years, consumers have decided to arrange their own funeral or that of a loved one prior to death. They have chosen in advance, what kind of funeral they want and the type of services they prefer. Funeral merchandise has been selected, and the order of the service has been prepared.
HOW TO PRE-PAY?
There are two methods of funding funeral pre-needs:
1)Trust-funded pre-need contracts;
2) Insurance-funded preneed contracts
If a consumer is prefunding a funeral, Maryland law state that only a licensed Mortician, Funeral Director, or Surviving Spouse may prearrange funerals. These licensed professionals must provide a General Price List, which details the prices of all funeral goods and services available at their funeral establishment. The consumer will decide on specific services and will receive an Itemized Statement and Pre-Need Arrangement that has been agreed upon and signed by both the purchaser and the seller.
WHAT IS GUARANTEED?
A guaranteed pre-need price contract means that the funeral home accepts the pre-need contract as payment in full for services and merchandise that were chosen prior to death. Therefore, survivors do not have to pay additional monies for funeral services or merchandise at the time of death. However, there are some items that the funeral establishment has no regulation over. These are called cash advance items.
CASH ADVANCE ITEMS TYPICALLY ARE NOT GUARANTEED
Cash advance items are fees charged by the funeral home for goods and services that the funeral home buys from outside vendors on your behalf, including obituary notices, death certificates, flowers, pallbearers, musicians, clergy offerings, religious services, and air fare that transfers the deceased from one funeral establishment to another funeral establishment. Cemetery services or crematory services, cemetery perpetual care fees and monument or memorial markers are also considered cash advance items. The price of cash advance items is affected by inflation costs.
If the pre-need contract is changed at the time of death by a survivor, perhaps by their choice of different services or merchandise than those services originally selected, the guaranteed contract is null and void. The survivor of the estate will be required to pay the current prices on all services. In addition, if the contract has not been paid in full prior to death, the contract is not guaranteed.
REVOCABLE AND IRREVOCABLE CONTRACTS
There are two kinds of pre-need contracts: revocable and irrevocable. Maryland law states that a buyer whose pre-need contract is set up as a trust may withdraw money at no charge from the funeral home. The revocable contract allows the buyer to cancel the contract and get a full refund plus interest, or the buyer may transfer the contract to another funeral home. If a pre-need contract is funded through life insurance, the purchaser will have a ‘free-look’ period during which he/she can cancel the policy.
An irrevocable contract allows the buyer to protect assets when qualifying for a public assistance program such as Medical Assistance or SSI. The irrevocable contract cannot be canceled. The purchaser may NOT withdraw the trust principle and interest. However, the purchaser may transfer his/her money from one funeral establishment to another funeral establishment, both in-state and out-of-state.
NOTE: A new pre-need contract must be executed at the new funeral home.
WHAT YOU SHOULD RECEIVE WHEN PREPAYING
- A General Price List with the Funeral Director prior to any discussion regarding fees;
- A Casket Price List;
- An Outer Burial Container Price List, if the deceased is to be buried;
- An Itemized Statement and Pre-Need Agreement;
- A signed copy of the Pre-Need Trust Contract or Life Insurance Contract;
- A copy of the deposit slip within thirty (30) days, if establishing a pre-need trust. This money must be deposited into a FDIC insured account;
- A copy of the Certificate of Insurance, if using a life insurance contract. This should be sent to you (purchaser) immediately upon receipt of the approved insurance contract;
- A copy of the deposit slip each time you (purchaser) make additional deposits to your pre-need account; and
- An annual 1099 tax form.