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Many people plan their financial future: investing in a home, saving for a child’s education and purchasing insurance is all done in preparation for tomorrow. Pre-arranging a funeral may be viewed as another step in that process.
There are many reasons why a person may choose to consider pre-arranging a funeral. Primarily, it provides a sense of security. Security in knowing your wishes are known and will be followed; security in knowing that your loved ones will be relieved of making difficult decisions while grieving; and security in knowing that you can finance your funeral preferences in advance.
If you do choose to pre-arrange your funeral, it is important that you plan ahead. Remember these steps when you begin to pre-plan:
Many people associate pre-planning with pre-funding. It is important to remember, however, that you may pre-plan your funeral without pre-funding it. Or, when pre-planning, you may choose to pre-fund partially or in full. Your licensed funeral director will explain all of the options available to you.
Although you are not required to pre-fund, many people choose the option of pre-funding while pre-planning. Why? For the same reasons they pre-plan: to relieve their loved ones of the emotional and financial stress of making difficult decisions while grieving.
To assure having sufficient funds at the time of need, funeral homes are required to either:
Funds must be deposited in a state or federally insured bank, savings and loan association, credit union, trust department thereof, or a trust company authorized to do business in the State of Iowa. These financial institutions are required to file an annual report of all pre-need trust funds to the Regulated Industries Unit of the Iowa Securities Bureau. The same rules apply to grave markers with the exception that, if funds are deposited at a financial institution, the required minimum is 125% of the wholesales cost of the cemetery merchandise.
Perpetual care cemeteries promise to provide eternal care and maintenance of the cemetery. To guarantee this, cemeteries are required to place at least 20% of the price of a burial space into the trust fund once full payment for the space has been received. The trust is administered under the jurisdiction of the district court of the county where the cemetery is located. Perpetual care cemeteries may have a separate perpetual care fund for markers.
If a funeral home or cemetery goes out of business and the obligations to provide the merchandise and services has not been assumed by another funeral home or cemetery holding an establishment permit, all funds held in trust, including accrued interest or earnings, shall be repaid to the purchaser under the agreement.
Public assistance laws change periodically, but they usually take into account that funeral expenses may be pre-paid. Your licensed funeral director will be able to guide you through options regarding Title XIX and other public assistance programs.
Pre-need arrangements may be funded through life insurance policies. The agent selling the insurance policy must hold an insurance license issued by the Iowa State Insurance Division. You may ask the agent to see his/her license before you make arrangements.
Contracts to be funded by a life insurance policy or annuity contract must disclose:
Most funeral homes in Iowa sell pre-need that will provide funeral services, funeral merchandise, and/or cemetery services or merchandise upon the death of the person named in the agreement. There are some things to consider when entering into an agreement.
Guaranteed and Non-Guaranteed Price Agreements
If you choose a guaranteed price agreement, the seller guarantees to provide the funeral services, merchandise, and/or cemetery merchandise identified for the amount paid on the agreement, plus interest. Except for cash advance items that the funeral establishment or cemetery pays to other individuals or businesses (grave opening and closing, copies of death certificates, organist, clergy, vocalist, flowers, etc.), there will be no additional costs for the specified services or merchandise. However, if there is an excess of funds after the services and merchandise are provided, the surplus belongs to the funeral home and/or cemetery.
In a non-guaranteed price agreement, the price of funeral services, merchandise, and/or cemetery merchandise is determined at the time they are provided. The amounts paid by the purchaser are treated as a deposit. If the amount paid under the agreement, plus interest, exceeds the total cost at the time of the funeral, the excess is refunded to the estate. If the amount paid under the agreement, including interest, is insufficient to pay for funeral services, merchandise, and/or cemetery merchandise, the purchaser’s estate, relative, or friend must pay any additional balance due.
Revocable and Irrevocable Agreements
In a revocable agreement, the purchaser may withdraw from the obligation at some time in the future. However, even in a revocable agreement, there are usually penalties for cancellation.
An irrevocable agreement is binding upon both parties to fulfill the terms of the agreement. Each party can be forced to abide by its terms. In case of default by the purchaser, the seller is under no obligation, unless otherwise stated in the agreement, to refund any money paid on the agreement. Only by mutual consent can the obligations under the agreement be changed.
Questions to Ask
Below are some questions you may wish to ask your licensed funeral director before signing a pre-need contract: