Funeral and End-of-Life Planning

Funeral Planning 

Individuals who have not planned for their funeral may leave loved ones to make economical and emotional decisions at a very difficult point in time. To avoid this traumatic event in the lives of your loved ones, individuals may consider pre-need funerals. 

A pre-need funeral requires an individual to plan in advance the goods and services of the funeral. It may also include planning the type of cemetery service. Individuals who plan a pre-need funeral designate the services and goods that are to be included in the funeral plan. 

The Federal Trade Commission requires the prices of sixteen services to be itemized: forwarding of remains to another funeral home; receiving remains from another funeral home; direct cremation; immediate burial; basic services of funeral director and staff (and overhead); transfer of remains to funeral home; embalming; other preparation of the body; use of facilities and staff for viewing; use of facilities and staff for funeral ceremony; use of facilities and staff for memorial service; use of equipment and staff for grave side service; hearse; limousine; either individual casket prices or the range of casket prices that appear on the casket price list; and either individual outer burial container prices or the range of outer burial container prices that appear on the outer burial container price list. 

The pre-need funeral does not include arrangements for cemetery services, if desired. The cemetery services require separate arrangements and include such things as the cemetery lots, the marker or memorial stone, opening and closing of the grave or crypt, and vaults. 

There are primarily three ways to fund a pre-need funeral in Colorado: insurance, trusts, and individual plans. 

Insurance funded prepayment mechanisms use life insurance. The individual signs a pre-arrangement agreement and purchases life insurance equal to the value of the funeral. The funeral home becomes the beneficiary with the benefits assigned to the funeral home. The funeral director who sells this type of policy usually receives a commission. A single payment or multiple payments can be made with coverage usually available when the policy is fully paid. 

Trust funded pre-arrangements require a payment equal to the cost of the funeral. According to Colorado law, the funeral director may keep up to 25% of the contract price. Funds received in excess of 25% are deposited in a trust fund with a bank or trust company located in Colorado. The income and appreciation from the trust fund is the sole property of the funeral home, however, the individual may incur a tax liability on the income and appreciation. 

Another alternative is to fund a funeral with a savings account or some other instrument that provides for a right of survivorship, allowing the funds to pass outside of probate and the will. Individuals may want to join a local memorial society. These are non-profit organizations which have negotiated contracts with local mortuaries to provide pre-planned (but not pre-paid) funeral services at substantial discounts. 

Individuals have a choice between guaranteed and non-guaranteed price plans. The guaranteed price plan means no matter what happens to inflation in the future, the funeral you pre-pay will be provided at no additional cost. Without a guarantee, the family may have to pay additional costs at the time of the funeral. 

Not all pre-need funeral plans are portable, if you move to another part of the country. Individually funded plans are very portable and individuals can use them wherever they may die. Trust agreements can be changed, but penalties may be incurred. Life insurance allows the individual to change the beneficiary at any time, therefore, you designate a new funeral home to be the beneficiary, if you move. 

Plans may be revocable or irrevocable. Most plans are revocable and can be changed if desired. An irrevocable plan is a contract that cannot be canceled. Individuals applying for Medicaid benefits are usually advised to purchase an irrevocable policy because it is considered an “exempt asset” for determining eligibility. 

Information on funeral homes and crematories in Colorado is regulated by the State of Colorado. 

Paying in advance may be attractive because it combines pre-planning with pre-funding. A major advantage of many pre-need plans is locking in a price with a guarantee. The choice is yours.