How Does Funeral Pre-Funding Work?

When you pre-fund your funeral you are paying "today's dollars" for future goods and services. Your payment is held in insurance or annuity certificates; deposited in a bank CD; or deposited in a trust (which may hold life insurance, annuities or bank CD’s as the trustfunding investment).

When using life insurance or annuities to fund your pre-arrangements, it's common in many states to assign limited ownership rights to your funeral home. The funeral home is also usually named as the beneficiary of the policy. However, certain states (most notably New Jersey) allow only an assignment to the extent of the funeral costs (similar to a collateral assignment or lien) to be placed on the policy. In no instance should your funeral home be designated as the sole owner and beneficiary of your policy.

The main advantages of "pre-need" life insurance or annuity products are:

• Tax Exemption: No 1099
• Flexibility: Payment options
• Portability: Ability to re-assign if you move
• Simplified Issue: No medical exam

Free Resources:

1. Download your free LCBA guide to "Buying Funeral Goods and Services" now!


2. Get your plan started with your free LCBA "Pre-Arrangement Planning Tool", a simple guide telling you: What to Expect; What to Decide; What to Do; Common Pre-Arrangement Mistakes; and How to Fund Your Arrangements.


3. Not quite sure? Click here for "4 Reasons You Should Pre-Plan and Pre-Fund Your Funeral".

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