- 16,907
To clarify my previous post I want to address Ramaiz's points one by one because I know there is a LOT of wrong information out there floating around.
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.
Wrong! It's the complete opposite. A funeral preplan that is funded with an insurance policy or trust can be easily canceled or transfered at any time. The original funeral home has no control over the policy in MOST states. (Florida and Mississippi are two exceptions. Florida the contract can be canceled and the original money refunded but with no interest and Mississippi is no-man's land as far as I can tell.)
2) If the Funeral Home runs out of business, what’s going to happen to your money?
Total misconception. The funeral home never has your money. Hundreds of funeral homes went bankrupt in recent years that were owned by The Lowen Group, Prime Succession and other funeral consolidaters and not one penny of preplanned funeral money was ever at risk because the money was held by Forethough, Homesteaders, Monumental etc. as life insurance policies. They were just as safe as any other life insurance policy.
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.
Not true for the most part. The way it actually works is: they are given a funeral quote today ($8271.20 for example.) They pay that amount today and have a starting face amount of $8,941.83. Let's say 15-years goes by before they die and the policy grew at 3% compounded it would now have a death benefit of $13,929. Let's say the funeral price increased an average of 4% each year so it is now $14,895 (a shortage of $966.) The funeral home writes off the difference and the family owes no money.
If I had sold this same policy to a family with a separate funeral trust (no assigned funeral home) it would have performed the exact same except the family would have to pay the $966 shortage.
If the funeral price would have increased at only 3% ($12,885) there would be an overage of $1,044 and that amount would be paid to their beneficiary of the life insurance policy or the estate if no beneficiary is named. If they had been on Medicaid, the overage of a funeral trust must ALWAYS be paid to Medicaid. That is why you don't want to OVERFUND a funeral trust which the NGL sellers usually encourage people to do (because of the low 2% growth rate.) For the record NGL also offer higher growth policies but that is not what I have seen being sold for the funeral trusts if there is no funeral home involved.
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.
Wrong! IF someone has a single premium life insurance policy and they are going on Medicaid, they can sign it over to a funeral home right up to the very day they apply for Medicaid. That makes it immedietely exempt from counting as an asset for Medicaid qualification. There is no reason to pay money or assign life insurance into an irrevocable funeral trust if you don't know for sure you are going to be applying for Medicaid. There are plenty of reasons why it is a bad decision and they all go back to giving up your control of your money for no reason.
A Funeral Trust or Irrevocable Life Insurance Trust is really the only viable answer with no funeral home being named the beneficiary.
I obviously disagree.
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.
Wrong! It's the complete opposite. A funeral preplan that is funded with an insurance policy or trust can be easily canceled or transfered at any time. The original funeral home has no control over the policy in MOST states. (Florida and Mississippi are two exceptions. Florida the contract can be canceled and the original money refunded but with no interest and Mississippi is no-man's land as far as I can tell.)
2) If the Funeral Home runs out of business, what’s going to happen to your money?
Total misconception. The funeral home never has your money. Hundreds of funeral homes went bankrupt in recent years that were owned by The Lowen Group, Prime Succession and other funeral consolidaters and not one penny of preplanned funeral money was ever at risk because the money was held by Forethough, Homesteaders, Monumental etc. as life insurance policies. They were just as safe as any other life insurance policy.
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.
Not true for the most part. The way it actually works is: they are given a funeral quote today ($8271.20 for example.) They pay that amount today and have a starting face amount of $8,941.83. Let's say 15-years goes by before they die and the policy grew at 3% compounded it would now have a death benefit of $13,929. Let's say the funeral price increased an average of 4% each year so it is now $14,895 (a shortage of $966.) The funeral home writes off the difference and the family owes no money.
If I had sold this same policy to a family with a separate funeral trust (no assigned funeral home) it would have performed the exact same except the family would have to pay the $966 shortage.
If the funeral price would have increased at only 3% ($12,885) there would be an overage of $1,044 and that amount would be paid to their beneficiary of the life insurance policy or the estate if no beneficiary is named. If they had been on Medicaid, the overage of a funeral trust must ALWAYS be paid to Medicaid. That is why you don't want to OVERFUND a funeral trust which the NGL sellers usually encourage people to do (because of the low 2% growth rate.) For the record NGL also offer higher growth policies but that is not what I have seen being sold for the funeral trusts if there is no funeral home involved.
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.
Wrong! IF someone has a single premium life insurance policy and they are going on Medicaid, they can sign it over to a funeral home right up to the very day they apply for Medicaid. That makes it immedietely exempt from counting as an asset for Medicaid qualification. There is no reason to pay money or assign life insurance into an irrevocable funeral trust if you don't know for sure you are going to be applying for Medicaid. There are plenty of reasons why it is a bad decision and they all go back to giving up your control of your money for no reason.
A Funeral Trust or Irrevocable Life Insurance Trust is really the only viable answer with no funeral home being named the beneficiary.
I obviously disagree.