Pre-Arranging/Pre-Financing

Planning ahead

Having just been through the process of arranging a funeral at the time of death, you know how stressful it can be. We would like to take this opportunity to provide you with some information on funeral preplanning, which may ease the emotional burden on your loved ones in the future.

New Jersey law

Under state law in New Jersey, prepaid funerals can be funded in only two ways: through a qualified trust account or with an insurance policy (or annuity) specifically intended for this purpose. Only licensed New Jersey funeral directors and registered mortuaries can offer prepaid funeral plans.

Trusts

If a trust fund is used, 100% of all moneys received must be placed in trust and all interest accrues to the benefit of the consumer. Trust investments can be made only in FDIC insured bank deposits, which offer safety and complete liquidity.

Insurance

At some funeral homes, an insurance policy may be purchased for payment of funeral expenses. Upon death, the insurance proceeds are paid directly to the funeral home. The premium of this policy is the current cost of the funeral. The moneys in the policy accrue interest towards inflation. If an insurance policy or annuity is purchased for prefunding, it must be issued by a licensed funeral directory possessing a life insurance license specifically for the purpose of funeral planning, and the policy must be approved for that purpose by the New Jersey Department of Insurance.

Revocability and irrevocability

There are two kinds of prepaid arrangements: revocable and irrevocable. Revocable arrangements must be refunded upon demand, including all principal and interest. All trust accounts and insurance policies that are not related to SSI, Medicaid or General Assistance must be revocable in the state of New Jersey.

Only individuals prepaying their funerals in order to qualify for SSI, Medicaid, or General Assistance may establish irrevocable arrangements, which may only be used for funeral and burial purposes. Irrevocable arrangements cannot, by law, be canceled or refunded (although consumers may change funeral homes).

Guaranteed and non-guaranteed plans

In a guaranteed price agreement, the funeral home agrees to provide the goods and services you have selected for the amount in the prepaid funeral account at the time of death, regardless of whether the retail value of those goods and services exceeds the amount in the account at the time of death.

A non-guaranteed agreement does not bind the funeral home to provide the goods and services selected if the value thereof exceeds the funds available at the time of death. If the value of the account at the time of death is less than that of the goods and services selected, your family has the flexibility to either pay the difference and follow through with your original arrangements or to alter the arrangements according to need.

Both types of plans have certain advantages, disadvantages, and limitations.

Make sure you understand what is or is not covered by any price guarantee.

How does it work?

At the time of prearrangement you will select the specific items of funeral merchandise and services that you desire. Your funeral director will determine today’s prices for your selection and provide you with a fully itemized statement. Your funeral director will then provide you with the trust fund agreement or insurance application in the amount of those charges. If you are prepaying your funeral for SSI or Medicaid eligibility, your funeral director will make the necessary arrangements to ensure the agreement will be accepted.

Consumer guidelines

If you are considering prepaying a funeral, treat it as you would any major purchase and be an informed consumer.

Ask a licensed funeral director what options are available. Understand the terms, conditions, and investment strategies of whatever prefunding vehicle you choose. Find out the current interest rate or yield for the plan you have selected, and check your account periodically to verify that it is keeping up with inflation.