THV Extra: Dealing with Death; Prepaid Funeral Homes

    7:15 PM, Nov 8, 2011   |    comments
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    LITTLE ROCK, Ark. (KTHV) -- We all plan for major investments in life, like our homes, college savings and retirement. But what about planning in advance for our funeral?  

    We continue our two-day series on end-of-life issues, tackling guaranteed prepaid funeral plans. Should you do it or not?

    We found out that there is actually a huge industry for these prepaid funeral plans. There are 190 companies licensed here in Arkansas offering them, mostly funeral homes and cemeteries.

    There's three main ways to finance them. You can do it with cash up front and the seller puts the money into the bank as a trust account. You can buy a life insurance policy through the seller. Or buy an annuity policy from them; that's basically a payment plan with no interest.

    Consumer Reports doesn't recommend these prepaid funeral plans. One of their reporters we talked to recently says they're just too risky.

    "You know the funeral home gets into trouble and starts using the money for other purposes or maybe they just steal the money, you know that's happened," Anthony Giorgianni saud. "There have been numerous cases of these management companies failing. If it's an insurance company that can get into trouble as well, so if you set these things up you're sort of risking that the company will not be there and millions of dollars have been lost that way."

    Consumer Reports says a safer route is doing this on your own; put money aside in a special bank account.

    "You can take that money and set it aside as a payable on death account or a Totten trust. And what you do is name someone you trust as a beneficiary, someone who you've discussed your arrangements with who will operate it in a way that follows your wishes," Giorgianni said.

    He recommends reviewing this fund every three to five years while you're still alive and making adjustments as needed.

    Now if you do opt for a prepaid plan, Consumer Reports advises comparison shopping and having a lawyer or financial planner see if this is the right decision for you.

    We also spoke with Arkansas AARP about these plans. They don't have formal position here but they do urge folks to be aware of their rights and protections, many mandated by state law. And here are a few things they want you to be aware of.

    "We recommend that you check with the Department of Insurance that the seller has a permit, that they abide by the regulations, they submit annual reports, that the contracts fully state all the rights, stipulations, obligations and duties of not only the seller but also the consumer," Arkansas AARP Director Maria Reynolds-Diaz said.

    We did speak with representatives from the State Insurance Department and they've been regulating these companies since 1995. The requirements also include putting everything in writing and locking in rates for the funeral costs.

    State insurance officials say things are actually good here in Arkansas; no major violations to report. But they do say in the past when there's been some, the companies fixed the problems and the consumers were able to re-coup enough money to cover their expenses. Part of that is through a special state fund set up where victims can apply for recovery money.

    And finally, with these prepaid plans, experts say talk to your family about it and make sure they're aware you have one if that's the case.

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