To Pay or Not to Pay

My children are at the post-secondary school age and I started saving for their education when they were infants.  I am seeing the benefit of having done that today.  The cost of an education would be almost insurmountable had I not.  A prepaid funeral is not unlike this concept of “saving up”.  Instead of a degree for my daughter and son, the next certain life event will be my funeral.

Last column, I discussed the notion of pre-arranging your own funeral.  There are many upsides to doing so and the last decision to make after prearranging is the question of prepaying those arrangements.  It is important to reiterate that funeral prepayment is an option when prearranging.  Getting your plans on file with a funeral home takes the guesswork out of the way for your family.  Paying for the plans takes the financial responsibility away from them.

It is an important fact to know that all funeral homes in Saskatchewan must place any funds collected in advance of providing services in escrow.  A prepaid funeral contract is essentially an agreement between you as the purchaser putting funds aside through a funeral home to be used for a future final expense. 

There are different types of contracts, but for this purpose, just understand that your prepaid funeral deposit isn’t money that you’ve spent.  It’s money you have set aside to be earmarked for your funeral.  The amount of that deposit is usually determined by the current day cost of providing the services you request.  An interest bearing trust account is then established in your name and is only accessible with a death certificate or cancellation/transfer request by you.  The interest income earned is not taxable and is your hedge against inflation.  This, very briefly, is an over view of the way a funeral can be prepaid using a funeral home and a trust account.

The second way to arrange future funeral payment is to purchase a funeral insurance policy.  You may have seen ads promoting such products.  I feel the best way to purchase funeral insurance is to find a product that has an actual agent representative with whom you can ask questions.  Many of the nationally advertised products just charge you a premium without doing a needs analysis.  Another benefit is that your insurance plan can be tailored as with the trust account plans so you do not exceed the amount you will need to have available in the future.  The insurance plans have a predictable future value where the trust plans do not.  Insurance plans can be set up as a savings vehicle or have the end value insured while making installment payments.  These options and structure are why it is important to have an agent to consult with and provide you with the best plan structure based on your needs.

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When you decide having the funds required to pay for your final expenses set aside and ready, just make the call.  Funeral Directors can explain and help.

Cheers!