Funeral Trusts

Jun 26, 2008

  1. arnguy
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    Are any of you Final Expense agents selling Funeral Trusts? If so, how do you find the market for this product---any good. Anyone know anything about NGL (national Guardian Life)?
     
    arnguy, Jun 26, 2008
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  2. xrac
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    The guy in the know about this is Newby!
     
    Last edited: Jun 26, 2008
    xrac, Jun 26, 2008
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  3. Mr. Bill
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    You mean Newby? Methinks so.

    I had posted (asked) about this a while back. I was approach by an agent who wanted to "downline me" and I asked what the criteria he used to select NGL as his product of choice. I figured since he was out soliciting, he would've done some research.

    Once I asked the question, guess what I got? Nothing. Therefore, I'm still sitting on it. Here's with some hope for a response from the board!
     
    Mr. Bill, Jun 26, 2008
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  4. Newby
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    I think the best way to do these (and the way I do them) is to contract with a funeral home that will guarantee the product.

    If you want to do it separate from a funeral home, the guys who seem to have their sales act together is "funeraltrust" and they do use the NGL product. However they only give it a 2% growth rate (to maximize commissions) and that is a dis-service to the clients. It won't keep up with inflation and they have no funeral home guaranteeing it. They will actually lose money.

    If you contract with a funeral home, you can use Forethought (Encore), Monumental (Pre-need version), Homesteaders and several others that have better growth, good commissions AND most importantly a price guarantee from the client's funeral home.

    I wanted to begin offering this product myself and approached several companies about designing a product. I participated in meetings with some attorneys who are probably the most knowlegable anywhere on this product and it is their legal opinion that offering Funeral Trusts without a contract from a funeral home is very illegal in most states. Medicaid law will require a funeral home to be involved in order for the trust to be exempt from a Medicaid spend down.

    You can however offer irrevocable trusts (don't use or imply the word funeral) and if 5-years pass before they apply for Medicaid, the funds should be exempt BUT if you are percieved as teaching people to hide funds from Medicaid just to hide assets you can have a whole other set of legal problems.

    My advice...find a local funeral home that wants you to do seminars for them and sell the trusts for them. It's a MUCH easier sell and the public is much more accepting of it. You are giving the client a better deal and can make a good living at it. And contrary to the presentation of "funeraltrust", there is no difference in what they do and selling it for a funeral home except better growth and a price guarantee. They are both equally portable if the client wants to transfer the contract.

    It is actually a dis-service to the client to put funeral funds in an irrevocable trust at all unless they are applying for Medicaid now. Funeral funds can be irrevocably assigned the same day they apply for Medicaid and be exempt from counting as an asset. So to have them irrevocably assign the funds years in advance (like funeraltrust.com) and others are doing has no purpose other than to scare the clients into a bad deal. They can purchase the single-pay, increasing benefit life insurance policy without the irrevocable trust and have more options and control.

    I'm not bashing "funeraltrust". I think if you want to get into this product, they probably can help you more than anyone. I just think it is a flawed concept under current laws and not a good deal for the clients (unless they get better growth.) I also have heard they have had to "undo" a lot of deals in some states do to grey areas of Medicaid laws and problems it has caused to families when they apply for Medicaid.

    That's my opinion and I'm sticking to it.
     
    Newby, Jun 26, 2008
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  5. theinuranceguy
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    I advise my clients to never pre-pay funerals direct to funeral homes.

    1) Once the funds are there, your stuck. You cannot transfer the money to another funeral home.

    2) If the Funeral Home runs out of business, what’s going to happen to your money?

    3) People are sold funeral packages, and think that they are locking in a price. NOT TRUE. Funeral homes will quote the family today’s price for the funeral, not the price they thought they had 10 years ago.

    Single Premium life insurance may make sense, but you have to understand that if a lawsuit occurs, admission to a Long Term Care facility, or a Tax Lien, their cash value from that life insurance policy is at risk.

    A Funeral Trust or Irrevocable Life Insurance Trust is really the only viable answer with no funeral home being named the beneficiary.

    I am far from an expert so I am not trying to come off that way, but what do you think Newby? Am I far off base here?
     
    Last edited: Jun 27, 2008
  6. Guest
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    Sorry Ramiz... Did you leave out a verb or two?? :err:

    I really want to know what you meant to say about SPWL...

    DJ
     
    Guest, Jun 27, 2008
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  7. theinuranceguy
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    Haha, that sentence is supposed to end with, "is at risk". Man, I have been slacking off lately.
     
  8. Guest
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    Makes sense now. :yes:
     
    Guest, Jun 27, 2008
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  9. Newby
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    Ramaiz,

    You could not be further from the truth. In almost all states, when people "prepay a funeral home" they are not actually paying anything to a funeral home. They are setting up a funeral trust. BUT, they are also getting a guarantee of performance from the funeral home.

    The funeral home will recieve no money and has no access to the money prior to death. But a very important check and balance takes place because the funeral home will want to make sure there is some decent level of growth to the money if they are going to guarantee it as payment in full in the future. Currently, most funeral homes would not accept a trust that grows at less than 3 to 4% annually. They would lose their ass if they did.

    The funeral price guarantees do hold water and in many states are required by law. There are very few instances of problems when you consider that every week, thousands of funerals take place have been preplanned and guaranteed years in advance. The few problems that are usually blown up for shock value by the media "see the Jan 2008 AARP magazine" are most often not even funeral preplans at all. They are prepaid cemetery contracts which are completely different. Prepaid cemetery contracts for spaces, caskets, burial vaults, monuments etc. are just purchase contracts (not trusts) and do not give consumers much protection.

    I prepaid funeral through a funeral home is easily transfered anytime to anyplace that the consumer wants to. He doesn't even have to notify the original funeral home. He just selects a new one and signs a form. It's simple, free, and the original funeral home has no control over the money. It is the consumer's responsibility to make sure the new funeral home will accept the contract as a guaranteed plan and not just as an insurance policy.

    I have sold thousands of funeral trusts through funeral homes since 1996 and most of them are in my home town. I am in the local phone book and I am registered with the local BBB. Out of over 3,000 sold, I have had not one single complaint. I do a good job of setting up the funeral plan correctly and the funeral homes are doing a good job of providing their service. I get nothing but referals and thank yous.

    Ramiaz, I do consider myself something of an expert in this area. I would personally greatly benefit from selling funeral trusts separate from funeral homes as that would open up a whole new and larger customer base to me. And I have looked into it. But in my opinion, it is not ethical in most cases. The consumer is paying more and getting less. And people who assign them irrevocably and aren't even applying for Medicaid immeadietely are really getting a bad deal in most cases. Indiana is the only state that requires all funeral trusts to be irrevocable regardless of Medicaid and that is bad for consumers too but at least they are getting a guarantee for their choice to irrevocably assign the money to an insurance company that is backed up by very strong state laws.

    I could write a book on this subject, but the bottom line is, if there is ever a good safe way that is a good deal for consumers to preplan funerals that will give them better benefits, more flexability and safety than doing it in co-operation with a funeral home, I will definitely be doing it. But as of right now, it doesn't exist in my opinion. And every week I have to walk away from business because I run across people who want to prepay a funeral trust but with funeral homes that I am not selling for. I could sell them the NGL product with their irrevocable trust but I would not sleep well at night.
     
    Newby, Jun 27, 2008
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  10. theinuranceguy
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    Newby I appreciate your response, I honestly had no Idea I was so far off base. So are you saying that most funeral homes do not use irrevocable trust to set up payment for the funeral costs?

    In Ohio where I do 100% of my business, I have heard Story after story (and have personally experienced) a funeral home make the family pay extra because the policy did not grow at a high enough rate.

    As a matter of fact, One client had a some Kind of Forethought Policy (this was years ago) and the annual interest rate on it was 1%. They made her pay extra for the casket and such because she was quoted a lesser price (years before).

    Also a story rings a bell of a funeral that stole peoples money and ran out of business... I want to say in TN, Im not for sure...

    Are these legitimate concerns? Or am I just crazy?
     
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