A prepaid funeral plan is an agreement made with a funeral home in advance: you select your funeral services and products, pay for them now, and the funeral home agrees to provide them when the time comes — at no additional cost to your family (in most cases). The appeal is obvious: you lock in today's prices, spare your family from making painful decisions under grief, and ensure your wishes are honored.
But prepaid funeral plans come with real risks that require careful attention before signing anything.
How Prepaid Funeral Plans Work
You meet with a funeral director, select the services and products you want (casket, urn, service type, etc.), and pay in advance — either in a lump sum or installments. Your funds are typically held in a trust account or a funeral insurance policy until your death, at which point the funeral home uses them to fulfill the arrangement.
Potential Benefits
- Price protection: You lock in current prices, potentially saving money if funeral costs rise.
- Relief for your family: Your family doesn't need to make difficult decisions or pay unexpected costs at death.
- Documented wishes: Your preferences are formally recorded and legally binding.
- Peace of mind: Knowing arrangements are made can be genuinely comforting.
Real Risks to Understand
Portability
If you move to a different city or state after signing a prepaid plan, transferring it to a new funeral home can be complicated or impossible. Some plans are "portable," but others result in a loss of funds or a significant price adjustment. Always ask about portability before signing.
Funeral Home Goes Out of Business
Funeral homes do close, merge, or change ownership. What happens to your prepaid funds depends on how they were protected — whether held in a state-regulated trust, an insurance policy, or (riskily) just the funeral home's own account. State regulations on this vary significantly.
Irrevocable vs. Revocable Plans
Some prepaid plans (particularly those required for Medicaid qualification) are irrevocable — you can't get your money back if you change your mind. Others are revocable but may charge cancellation fees. Understand what you're agreeing to before signing.
Vague Contract Language
Contracts may promise "comparable" items if the specific products selected are no longer available — leaving room for substitution you would not have chosen. Read contracts carefully and get specifics in writing.
What's Not Included
Many prepaid plans don't include cemetery costs (plot, opening/closing fees, headstone) or death certificates — items that may add thousands of dollars at time of death. Confirm exactly what is and isn't covered.
Questions to Ask Before Signing
- Where will my funds be held? Are they protected if the funeral home closes?
- Is this plan revocable? What are the cancellation terms?
- Is it portable if I move?
- What happens if specific items are no longer available?
- What is and isn't included in the price?
- How are price increases handled?
Alternatives to Prepaid Plans
If the risks of prepaid plans concern you, consider alternatives for funding your funeral while still documenting your wishes:
- Payable-on-death bank account: Set aside funds in an account that transfers immediately to a named person at death, bypassing probate and delays
- Life insurance: A small burial or final expense insurance policy can fund funeral costs without the risks of a funeral home contract
- Document your wishes separately: Write detailed funeral instructions and keep them accessible — the funding can be handled separately from the expressed wishes
See our guide to funding your funeral costs for a full comparison of approaches. For the complete picture, see our guide to planning your funeral in advance.