Question: A good friend recently died and it made me wonder, should I prepay my own funeral? Is it worth it to set up now while I'm in my 50s?
Answer: I'm sorry to hear about your friend. Sometimes it takes a loss like this to make us face our own mortality — and the costs that come with it.
Chances are, you’ve put a lot of thought into planning for different milestones during your lifetime — buying your first house, sending your kids off to college, and retirement. But it’s just as important to plan for what happens once you’re no longer around.
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In the course of your estate planning, you might write up a will or put a living trust in place for an easier transfer of assets. Another important aspect of estate planning you may want to consider is arranging your funeral ahead of time. That could mean choosing a location and providing detailed instructions to your loved ones about the type of service you want.
It might also involve paying for your funeral ahead of time so your loved ones don’t have to.
The National Funeral Directors Association says that in 2023, the median cost of a funeral with a viewing and burial was $8,300. But that cost could easily rise through the years. So you may want to spare your loved ones from having to bear it.
Still, the decision to prepay a funeral or not isn’t an easy one. Here’s what to consider.
The benefits of prepaying your funeral
Beat inflation
The cost of pretty much everything is likely to rise over time. For something as expensive as a funeral, that alone makes the case to prepay.
Phillip Reed, Estate and Asset Protection Attorney at Reed Law PLC, says a big benefit of prepaying a funeral is shielding your family from price increases.
"Funeral costs have historically increased 3% to 5% annually, so a $10,000 funeral today might cost $16,000 in a decade,” he says. “My friend who lost his wife unexpectedly had a $36,000 funeral expense, which he had to pay within weeks of his wife's passing.”
Avoid probate
Plus, Reed says, “Prepaid funeral plans bypass probate entirely, meaning your family isn't scrambling for cash.”
Assets left to loved ones in a will have to go through probate, which means they could be tied up for months or even years, says Renee Fry, CEO at Gentreo, Inc. But a funeral can’t wait months or years, which means your family may have to scramble to come up with the funds for a funeral if it’s not paid for already.
“It’s a common misconception that monies left to your heirs in a will can be used right away to pay for one's funeral,” Fry explains. “Given that so few of us have money on hand to pay for a burial and funeral, pre-need planning has become popular…You can pay for things like cremation, burial, a religious service, and all the immediate costs.”
Help your family
Another benefit to prepaying your funeral? It removes the burden of decision-making from grieving loved ones, says Reed.
“I've watched families argue over burial versus cremation, casket choices, and service details, all while emotionally devastated,” he says. “When you make these decisions yourself, you spare them that anguish.”
Drawbacks and pitfalls to consider
While there are benefits to prepaying your funeral, there are some pitfalls you may encounter.
Your circumstances may change
“One big issue with prepaying for your funeral,” says Reed, “is if you move or change your mind about where you want services held, transferring prepaid plans can be complicated and sometimes impossible. Some plans aren't portable, meaning you could lose money.”
Along these lines, if your loved ones move to a different part of the country, being locked into a specific geographic location could prove burdensome to them.
Imagine your grown children having to pack up their kids and fly across the country for your funeral in the middle of a busy school year. Allocating funds to your funeral in a different way, without prepaying for a specific location, is something you may want to consider.
There’s also the concern about the funeral home you’ve chosen going out of business. However, Reed explains, “This can be solved by making sure your money goes into a trust or insurance product, not just directly to the funeral home's operating account.”
Reed does caution that these products can vary by state, so it’s important to consult with a professional to understand how this option might work.
Beware Medicaid eligibility rules
Another issue that could arise if you prepay your funeral, says Reed, is complications with Medicaid.
“Prepaid funeral plans, up to certain limits, are typically exempt assets that won't affect Medicaid eligibility, but only if structured correctly,” he says. However, Reed assures, “If set up correctly, this can be a smart estate planning move for those concerned about long-term care costs.”
So, should you prepay your funeral?
Funeral costs are only likely to rise over time, and tools like wills or even trusts may not give your loved ones access to money to pay for a funeral as quickly as you’d like.
“Probate doesn't care about your funeral director's payment timeline,” says Reed. “Even ‘simple’ estates can take six to 12 months to settle.”
Reed says one possible alternative to prepaying a funeral is using a life insurance policy with a named beneficiary. But even those payouts can take weeks, he cautions.
All told, Reed calls prepaying a funeral “a good option.” But you may want to consult a financial adviser or estate planning attorney to see if it’s a good one for you.
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