Pre-Need vs At-Need Funeral Arrangements: How to Choose

A pre-need funeral is one you arrange before a death. An at-need funeral is one your family arranges after a death. "Pre-need" can mean only planning, such as choosing a funeral home and writing down your wishes, or it can mean planning and paying in advance. The Funeral Consumers Alliance, a nonprofit consumer group, advises planning ahead without paying ahead unless Medicaid requires you to spend down.

What do pre-need and at-need mean?

The two terms describe when the arrangements are made.

Funeral providers also use "pre-need" for the contracts they sell. A pre-need contract is an agreement to pay a funeral home or cemetery now for goods and services you will need later. Our guide to pre-paid funeral plans covers how those contracts work.

The FTC Funeral Rule applies in both cases. The FTC says it covers you "whether you are making arrangements when a death occurs or in advance," and it lets you choose only the goods and services you want and pay only for those. See our guides to the FTC Funeral Rule and the General Price List.

Is planning ahead the same as paying ahead?

No, and this is the most useful distinction in the whole topic. Planning means making choices and recording them. Paying means giving a funeral home or insurer money in advance. You can do the first without the second.

The FTC lists the benefits of planning: you can make informed decisions, compare prices from several providers, spare your survivors from deciding under stress, and arrange things directly with a funeral home. It also suggests deciding where remains will be buried, entombed or scattered, and buying cemetery plots before they are needed.

The Funeral Consumers Alliance goes further. It says that unless Medicaid requires you to spend down to qualify for benefits, you are better off planning ahead without paying ahead. Its reasons are in the next section.

What are the risks of paying in advance?

According to the Funeral Consumers Alliance, the main downsides are:

• If you cancel or change the plan, you may get only part of your money back or none.
• Sellers may take the interest on the account each year.
• An insurance policy's cash value is almost always much less than you paid in.
• Insurance may not pay full benefits during the first few years of premiums.
• What you pay today may not cover future funeral costs.
• Your family may not know about the plan and may pay a second time.
• The funeral home may close or change hands, and moving away can make refunds harder.

The FTC adds that prepaid funeral protections vary widely from state to state. Some states require funeral homes to put the money in a state-regulated trust or buy a life insurance policy. In its words, some state laws offer little or no effective protection.

If you do prepay, the FTC suggests asking:

1. What exactly am I buying, only merchandise like a casket and vault, or services too?
2. How does my state handle the money?
3. Who gets the interest?
4. What protects me if the business closes?
5. Can I cancel and get a full refund?
6. Does the plan transfer if I move?

Our guide to how to choose a pre-paid plan goes through these in more detail, and are pre-paid plans worth it weighs the trade-offs.

How do Medicaid and SSI affect the decision?

This is the main situation where prepaying is often considered. The Funeral Consumers Alliance says an irrevocable trust can protect money when you qualify for Medicaid, because the funds are excluded from your countable assets. It warns against doing it speculatively. It should only be done when Medicaid eligibility is certain.

For SSI, federal rules exclude burial spaces such as plots, crypts and niches. They also let each person exclude up to $1,500 set aside for burial expenses, if the money is kept separate and clearly designated. Funds in an irrevocable burial contract or trust reduce that $1,500 exclusion dollar for dollar (20 CFR 416.1231).

Medicaid rules differ by state, so check with your state Medicaid office or an elder law attorney before you move money. Our guide to Medicaid and funeral assistance has more on the benefits side.

How do you record your wishes so your family can find them?

The FTC says to put your preferences in writing and give copies to family members and your attorney, and to keep a copy somewhere accessible. It warns against two common mistakes:

• Putting wishes only in your will. A will often isn't read until after the funeral.
• Leaving the only copy in a safe deposit box. Weekends and holidays can make it hard to reach in time.

The FTC also recommends reviewing your decisions every few years. If you have prepaid anything, tell your family. Without that, the FTC notes, wishes may go unfulfilled or relatives may pay twice. Our guide to telling your family your funeral wishes and the funeral conversation with parents guide can help you start.

What if you are arranging an at-need funeral?

If the funeral is yours to arrange, first find out whether your relative planned or prepaid anything. Look for a funeral contract, a trust or insurance paperwork, or correspondence from a funeral home or cemetery. Call the funeral home named in the papers before you pay anyone else.

If there is no plan, you still have time to compare. Funeral directors must give you price information on the phone if you ask, and the written General Price List is itemized. Ask for it from more than one home, and choose only the items you want.

Our guides to the first 24 hours after a death and how long after a death a funeral happens explain the order of events. If money is tight, see who pays for a funeral.

How do you decide between the two?

There is no single right answer, and the choice depends on your health, money and family. Some points people weigh:

Pre-need planning tends to suit you if:

• You have strong wishes about the service, burial or cremation.
• You want to spare your family from guessing.
• You can write things down and share them, even without paying.

Prepaying is worth a closer look if:

• You are applying for Medicaid or SSI and need to protect assets under your state's rules.
• You have found a funeral home you trust and a contract with clear protections.

Leaving it to at-need can work if:

• Your family already knows your wishes and has money or insurance to cover costs.
• You would rather keep your savings flexible.

Veterans have one more pre-need option. A VA pre-need eligibility determination tells you in advance whether you qualify for burial in a VA national cemetery. It does not reserve a gravesite, and you apply with VA Form 40-10007. Our national cemetery eligibility guide explains who qualifies.

What to do next

1. Collect General Price Lists from two or three funeral homes and compare the items you want.
2. Write down your wishes, including who to call, and give copies to your family and attorney.
3. If you are considering prepaying, ask the FTC's questions above in writing and read the whole contract.
4. If Medicaid is involved, talk to an elder law attorney or your state Medicaid office first.