What is my best and safest option for putting aside money for a funeral?

Cremation network

This is becoming an increasing dilemma today with funeral trust funds not always delivering, and the economy in such a dire state that so many are feeling the effects. Today more families are finding themselves dealing with something near a crisis when a family member dies without a funeral plan or any money to pay for a funeral. So we are often asked the question–what is the best and safest way that I can secure funds to pay for my funeral.

Prepaying with a funeral plan

The funeral industry has been selling pre-need funeral contracts for many years. Whilst a preneed contract can appear to secure your funeral needs and seem to provide an opportunity to ‘lock-in’ to current funeral prices, there are still risks with a funeral plan. There is legislation and licensing that governs preneed funeral plans, but this varies state by state, affecting how monies are refundable or transferable.

If you are pre-paying because you are required to have a funeral plan to qualify for nursing home care, then this is the way to go. Many nursing homes now require a patient to have a funeral plan before they will admit them. And up to $6,000 placed into a funeral plan is discounted if you are assessed for Medicaid at a later date.

Laying aside the money in a Payable on Death (POD) account

This is a safe and reliable way to make sure your family has the funds to pay for funeral expenses. The best way to alleviate some of the stress for your surviving family is to discuss with them your funeral wishes, and put some money aside in a payable-on-death account. A payable on death (POD) account simply means that you name a beneficiary in the family who can immediately access these funds. Your family will not have to wait for probate.

A payable on death account is also referred to as a Totten Trust (ITF), Transfer on Death (TOD) or a Revocable Pay on Death (POD).

How do I set up a POD account?

You will need to arrange to visit your bank or the bank you have selected to open a POD account. You can also arrange to make a certificate of Deposit (CD) for a sufficient amount to cover your proposed funeral expenses. You may also wish to place some extra funds in the account to assist the family with covering any other expenses. You will need to provide the necessary ID and name the beneficiary who may access the funds.

What needs to be done to keep the account in good standing?

Each state has its own rules about the activity on a POD account and the frequency of any withdrawals or deposits. You should carefully check the rules with your bank to ensure the account does not fall into a dormant state. It can be difficult to restore a dormant account. There should be no dormancy rules with a CD account. You will need to pay any taxes associated with the account, although these should be minimal, and you will receive any interest accrued.

You may wish to revisit your funeral preferences from time to time to ensure that the funds you have put aside will still adequately cover your requirements.

Cremation Plan

Who should be named as a beneficiary?

It is wise to name someone in your family whom you trust to administer the account. You may wish to name the executor of your will, a power of attorney or even a health care agent. It is recommended not to name your funeral director as a beneficiary. Some banks allow you to name 2 beneficiaries, which can be a good idea, and any funds are split 50/50. It can be advisable to ensure that more than one person can access the funds. It can also be a backup strategy in case one person is unable to act or dies.

How do I ensure that my family knows about my POD account and my funeral plans?

Once you have set everything up you need to communicate what you have done to your family, attorney, and executor of your will. It is no good having been so careful and set these plans in place if your family does not find out about them until too late. It is not uncommon for us to hear about families who have already arranged a funeral, and even laid out monies before they discover that the deceased had a plan/fund in place.

Talk to your family, tell them what you have organized. Write down your funeral wishes and the information about your POD account. Keep it safe but somewhere where your family can easily access it when the need arises. If you have a will, ensure the details of the money you have set aside for your funeral is clearly detailed.

Taking the time to prepare your affairs, decide upon your funeral preferences and set aside the funds, can significantly save surviving family from the emotional and financial burden. Just eliminating much of the difficult decision-making process can help families get through those first initial days following a death. Having funds set aside that they can immediately access, can make arranging a funeral so much less stressful.

Written by

Sara is the Editor in Chief for US Funerals Online and has been researching and writing about the death care industry in the US for the last 15 years.