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Inflation affects everything. Yes, even funeral costs. Why? Mainly
because each year it costs more to do business and if funeral homes
did not raise their costs over time, they would not be able to offer
families their facilities, services, and professional staff. At the
same time, merchandise manufacturers and cemeteries will increase
their costs, and that will affect the total costs as well.
What the funeral industry has seen is that funeral costs will nearly
double every 7-10 years with inflation. If you think about it, that
pales in comparison to the inflationary costs of homes, automobiles,
and many other things.
It is a fact that inflation will be a factor in the future cost of
a funeral.
But there is something that you can do to control that. You can pay
for your funeral costs in advance, and there are several ways to do
that.
Trust:
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Advantage
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Traditionally, a Trust has been the choice of many
funeral homes. A trust account would allow for an
individual to set aside funds that may cover either
a portion, or all of the funeral expenses. These accounts
may earn interest as they mature. At the same time,
funeral costs continue to nearly double every 7-10
years. The interest earned in your account may keep
pace with inflation and cover the funeral costs in
the future. These accounts can also be set-up to be
excluded as (irrevocable), should you ever need to
apply for state assistance in the future for nursing
home or long term care. Most funeral homes provide
trust accounts.
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Disadvantage
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In many cases, trust accounts may lose value as
time passes. The interest earned on the account would
be taxable each year/and if the funds are held with
a state association fund, there may be fees as well.
You would either receive a 1099 at the end of the
year or in some cases, the tax is taken out of the
income earned in the trust for the year. Another thing
to consider is many funeral homes will not guarantee
a funeral trust because they may not keep with the
rate of inflation. In regards to a trust, let's say
that you chose a funeral that totaled $7,000.00 and
you could only put aside $100.00 a month towards that.
Six months into the payments, should you pass away,
your family will have to come up with the remaining
$6,400.00. Another scenario involves putting down
$4,000.00 and not paying anything more. However, the
cost of tech services will increase and a trust is
normally not guaranteed. The difference between the
total cost of the funeral and the value of the trust
would be the family's financial responsibility.
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Insurance:
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Advantage
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Finally there is a light at the end
of the tunnel. Here is how it works. Let's take that
$7,000.00 figure mentioned earlier. With the insurance
product, you may make a single payment for the entire
cost of the funeral. However, depending on your age,
you may choose a 3, 5 or 10 year plan which will allow
you to make monthly payments towards that $7,000.00
cost. Most insurance companies have a limited death
benefit during the first two years. (I can explain
the details of these benefits if you will call or
email me). At the second year, one hundred percent
of the insurance in payable even on a 10 year term.
If your death is caused by accident the insurance
coverage is one hundred percent. In any case as soon
as you start a policy like this, you secure today's
prices. Your monthly premiums will depend on three
factors: the amount of the services, your age and
how many years you choose to pay. You can not be denied
a policy because of health. These policies earn a
guaranteed interest unlike trust accounts, so the
funeral cost can be guaranteed by the funeral home.
These policies are not taxable, they can also be set-up
to be made (irrevocable) excluded as an asses for
state assistance like medi-cal or nursing care. These
policies also have an interest-free period, in which
you can make the monthly payment and at some specified
point make an early payoff payment and pay no more
than the total funeral cost. This is a wonderful protection
and something that more and more people are doing.
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Disadvantage
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The only disadvantage that some people will tell
you is that the policy may not earn enough interest
to cover the funeral costs in the future, if inflation
increases too fast. This is only a concern to the
funeral home offering the product, because the funeral
home will be the one who absorbs the difference in
there is not enough money in the policy to cover the
cost of the funeral. The funeral home takes this risk
to insure the future business.
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