How safe are prepaid funerals?
Staff writer
Wichita residents Diana and Larry Landsverk, both in their 80s, prepaid about $4,000 last year through Yazel-Megli Funeral Home for cremation and burial in family plots at Youngstown Cemetery.
“We were worried,” Diana said.
The Landsverks are among customers questioning what will happen to prepaid funeral arrangements after ReadyCap Lending filed suit seeking foreclosure and a sheriff’s sale of the Yazel-Megli funeral home network.
The lawsuit involves two Small Business Administration loans totaling $3.93 million.
The litigation seeks enforcement of loan documents and does not by itself determine what happens to prepaid funeral arrangements.
What happens instead depends on how an individual arrangement was established, according to industry experts, state regulators, consumer advocates, and estate planning pros.
Funeral arrangements often are made years before. This ensures that families trust descendants’ wishes and have money set aside when the time comes.
Pre-paid funerals come against a background of financial pressure on independent funeral homes.
Tom Morris, chief executive of Downing & Lahey Mortuaries and Crematory in Wichita, said family-owned funeral homes had been declining for decades as corporations acquired local firms, fewer children entered the profession, and cremations began replacing traditional burial.
“There are fewer funeral homes than there were 40 years ago,” Morris said.
The Landsverks found their answers in paperwork they had completed.
Their contract indicated the money they paid was placed in an escrow account at Tampa State Bank. After talking to a bank officer, they were assured the money remained there.
“We don’t care, because we know they’re taking care of our money in the bank,” Diana said.
How a prepaid arrangement is handled depends in part on how it was paid for.
“A funeral home is not entitled to any of the money until the date the services have to be provided,” Morris said. “If somebody prepays for a funeral at a future date, the consumer always has the right to decide where that funeral will be conducted.”
Because of that, Morris said, a funeral home’s financial woes do not automatically mean customers lose money set aside for funeral expenses.
“If a funeral home closes, the customer is still protected,” he said.
Morris said families should keep copies of insurance policies, contracts, and other documents related to prepaid arrangements.
Those records can help another funeral home honor the arrangement if services are transferred.
Any funeral home in Kansas can assist families when the time comes, Morris said. Arrangements can be changed and, depending on how they were paid for, the money set aside generally remains available to pay for those services.
Morris cautioned that prepaid funerals were paid for the same way. Consumers with questions about their contracts should review their paperwork and determine how their arrangements were established.
J.W. Carey, executive secretary of the Kansas State Board of Mortuary Arts, said oversight of Kansas preneed funeral agreements fell under the secretary of state’s office.
Money set aside remains the purchaser’s property until it is needed and cannot be used before the purchaser’s death, Carey said. Kansas law allows consumers to transfer prepaid funeral arrangements with written notice if they choose another funeral home.
However, not everyone agrees that prepaying funeral expenses is the best financial decision.
April St. Onge, chief administrative officer of the Funeral Consumers Alliance, said she recommended planning funeral arrangements but generally advised against paying in advance except in limited circumstances, such as when qualifying for Medicaid, lacking a trusted family member or friend to carry out final wishes, or being near the end of life.
Many consumers mistakenly believe prepaying guarantees every funeral expense. Additional costs often arise, St. Onge said.
She also cautioned that prepaid arrangements might not always transfer easily if someone moved. In rare cases, she said, consumers have lost money through embezzlement or funeral home failures.
Before signing a preneed contract, St. Onge said , consumers should determine whether prices are guaranteed, where the money will be held, whether the arrangement can be transferred to another funeral home, what happens if the funeral home closes, and which expenses remain the family’s responsibility.
She also recommended keeping copies of contracts, proof of payment and other documents.
Alexander Robinson, an estate planning attorney with Full Circle Estate Planning and Probate in Wichita, generally recommends prepaid funerals because they can relieve surviving family members of financial and administrative burdens. However, he also said consumers should carefully research the funeral home they choose.
Robinson would advise against prepaying only if doing so would create a financial hardship. As an alternative, he said, some families choose to purchase a cemetery plot while leaving other funeral decisions until later.
For consumers who already have prepaid funeral arrangements, St. Onge said, the first step if a funeral home experiences financial trouble is to determine who holds the money. Consumers should then contact that firm and, if necessary, the funeral home’s successor or a state consumer protection agency.