Part Twelve Estate Planning and Funeral Plans and Burials _________

Part Twelve -Estate Planning and Funeral Plans and Burials _____________________________________________________________ Part XII Estate Planning and Funeral Plans and Burials _______________________________________________________________________ Funerals and burials are among the most expensive purchases older consumers make. The average cost of a traditional funeral is $4,600. Flowers, obituary notices, acknowledgment cards, burial liners or vaults, and special transportation can add an additional $1,000. Inground burial can add another $2,400 to total expenses. Basics of Funeral Planning Funeral homes are required to provide price lists to help the consumer know what options are available and how much they will cost. Funeral homes, but not cemeteries, must disclose prices by telephone and offer price lists for review at each facility. Many funeral homes will mail their price lists, although the law does not require this. Most persons select a funeral home or cemetery based on ! ! ! Location Reputation Personal experience Since costs significantly vary among providers, the individual should call or visit at least two funeral homes and cemeteries to compare prices. One should compare prices for the entire package as well as the cost of the separate items involved. Every funeral home should have separate price lists for general services, caskets, and outer burial containers. Only by using both lists can one accurately find the total costs and be able to make an accurate comparison. General Services The general price list itemizes the available services and their cost. Options include: ! ! ! ! Transportation of the body to the funeral home and to the place of final disposition Care of the body, including embalming and "casketing," or dressing the body Use of facilities for a viewing, wake, or visitation, and the funeral or memorial ceremony at the funeral home purchasing flowers, preparing obituary notices, or providing music 74 Part Twelve -Estate Planning and Funeral Plans and Burials _____________________________________________________________ General price lists also will include prices for alternative arrangements such as: Immediate Burial - This is a simple, low-cost funeral. The body is interred without embalming, if not against state law, in a simple container. There is no viewing or ceremony with the body present. A package price for immediate burial will include the funeral director’s fee, transportation, and care of the body. It may not include the charge for a container, casket, or simple pine box. Direct Cremation - The package price for direct cremation includes the funeral director’s fee, transportation of the body, and care of the body. It may not include the charge for the cremation. Caskets - A casket is the single most expensive item in a traditional funeral. One survey found an average price of $1,658. Caskets are available in many styles and prices. They may be made from metal, wood, fiberglass, or plastic. Traditionally, caskets were sold only by funeral homes, but now cemeteries and third parties sell caskets which can be purchased on the Internet. Under the federal Funeral Rule, a funeral home cannot charge extra for services provided, if the deceased's family provides the casket from an outside source. No casket is required if one chooses direct cremation, immediate burial, or the donation of the body to science. Outer burial containers - Most cemeteries require the use of a grave liner or vault. These outer burial containers surround the casket in the grave to prevent the ground from sinking. In some locations, both funeral homes and cemeteries sell vaults and liners but it is possible, and less expensive to purchase an outer burial container from a third party. Funeral Pre-Planning Trends in the Industry Traditionally, funeral directors provided funeral goods and services, and cemeterians handled goods and services for burials. Increasingly, funeral directors are now providing goods and services once exclusive to cemeterians; likewise, cemeterians sell items that were once exclusive to the funeral industry. In the past, pre-need agreements often included only cemetery plots and, therefore, were primarily sold by cemeterians. Pre-need agreements are now likely to include a package of both funeral and burial goods and services that may be sold by funeral directors or cemeterians. Increase in Large Chains Large chains are increasingly buying local funeral homes and cemeteries. Major commercial chains now account for approximately 30 percent of the country's funeral business. These large chains actively market and sell pre-need agreements. 75 Part Twelve -Estate Planning and Funeral Plans and Burials _____________________________________________________________ Third Party Sellers Increasing numbers of third party sellers are selling pre-need agreements. Third party sellers are persons who, traditionally, have sold caskets, headstones, and other funeral and burial products. While third party sellers are neither funeral directors nor cemeterians, in states that allow third party sellers to sell pre-need agreements, they are subject to the same pre-need agreement regulations that apply to licensed funeral homes and cemeterians. Regulation of Pre-Need Agreements More and more Americans are entering into pre-need agreements to purchase funeral and burial goods and services prior to death. Currently, funds in pre-need agreements exceed $25 billion, up from $18 billion in 1995. In a recent survey, two in five persons age 50 and older reported that they had been contacted about the advance purchase of funerals (43%) or of burial (39%) goods and services. There is currently no federal regulation of the growing pre-need industry. Some individuals preplan for their own funerals and burials by comparing prices, discussing plans or leaving instructions with family, or making decisions about funeral and burial goods and services that do not require payment in advance. Some individuals may also preplan by setting aside money in a bank account for the future purchase of funeral, burial goods and services by the appropriate survivor. Individuals prepay for funerals and burials by entering into a pre-need agreement, or contract, to pay in advance for goods or services they will receive upon death. Generally, this agreement is between the individual and the funeral director or cemeterian, and is funded through a funeral trust, annuity, or insurance policy. At the time of the agreement, a third party - typically a trustee or insurance company - assumes responsibility for the management of the funds. Thus, the individual often loses access to the funds upon signing the agreement, and can regain access to the funds only through the termination of the agreement. Upon the individual's death, the representative of the funeral home or cemetery that is providing the designated goods and services uses the funds. Regulating the sale of pre-need funeral and burial agreements is more complicated than regulating the sale of many other types of consumer products. A primary complication involving pre-need agreements is the length of time between the signing of the agreement and the need for the goods and services described in the agreement. If trust funds are mishandled after the signing of the agreement, such mishandling may go undetected for years. In addition, it is often difficult to determine whether specific provisions of the contract were executed (type of casket, for example), since the person who signed the contract is deceased. 76 Part Twelve -Estate Planning and Funeral Plans and Burials _____________________________________________________________ No federal legislation, including the Federal Trade Commission's (FTC) Funeral Rule, specifically addresses the sale of pre-need agreements. State laws and regulations governing the pre-need industry are inconsistent across the states. In addition, many cemeteries, such as religious and municipal cemeteries, are exempt from state regulation. State Pre-Need Regulations State regulations have generally addressed: ! ! ! ! Licensure requirements for sellers of pre-need goods and services Requirements of funds in trust Contract provisions and cancellation requirements Consumer protection recovery funds These regulations vary in scope, approach, and requirements. Every state except Alabama has a law governing the sale of pre-need funeral and burial contracts. Twenty-four states regulate both funeral and burial contracts in a single statute, 11 states have separate pre-need funeral and burial contracts, and the remaining 14 states have a single statute that covers only pre-need funeral contracts. Depending on the scope of the state statute, the law governs goods and/or services. Licensure Requirements State laws vary as to who can sell pre-need contracts (funeral home or cemetery representatives, or third party sellers) and whether a separate pre-need license or permit is necessary. If the pre-need contract is funded with an insurance product, some states require that the seller be a licensed insurance agent. Only five states have laws that specify unfair and deceptive acts. Trust Fund Requirements The percentage of individual pre-need funeral agreement funds that funeral directors are required to put into trust varies across the states. Most states require that 90% or more of the proceeds of the sale of funeral pre-need agreements be placed in trust. Some states have no such requirement. Other states have requirements ranging from 40 percent to 100 percent. Among those states that require a trust to hold assets for pre-need cemetery agreements, funding amounts range from about 30 percent to 100 percent. In more than 30 states, the seller must place at least 75 percent or less of pre-need cemetery agreement proceeds in trust. 77 Part Twelve -Estate Planning and Funeral Plans and Burials _____________________________________________________________ Contract Provisions and Cancellation Requirements State pre-need laws contain different requirements regarding the form and content of preneed contracts. Some states only require that the contract be in writing and include the names of the parties and the terms of the agreement. Other states specifically require standard disclosures, easy-to-understand language, and large font print. The procedures for canceling a pre-need funeral or burial contract vary from state to state, as does the amount of money that is refundable to the purchaser upon cancellation. Only a minority of state laws requires that the pre-need contract include a specific disclosure about the purchaser's right to cancel. Individuals who relocate, decide they prefer another funeral home or cemetery, or want to cancel their agreement may not be able to transfer or cancel without a penalty. In some cases, individuals could lose significant amounts of money. Consumer Protection Recovery Funds Recovery funds are established by states as a way to make funds available to consumers who have been defrauded or have experienced a breach of contract. Currently, eight state laws have a consumer protection recovery fund for pre-need funeral and/or burial agreements. States that establish recovery funds generally require that sellers of pre-need agreements pay a fee for each agreement sold, with the fee based on the value of the contract. The fees placed in the recovery fund are used to compensate a pre-need buyer when a seller who has breached the pre-need contract has insufficient funds to provide a refund. Federal Trade Commission's Funeral Rule The Federal Trade Commission's (FTC) Funeral Rule specifies that consumers are entitled to price information about funeral goods and services, whether they are inquiring by telephone or in person. Funeral homes are required to give individuals a general price list (GPL) that can be used for comparative shopping. Since the Rule applies only to persons providing both funeral goods and services, it does not apply to cemeterians or third party sellers. Moreover, the Rule does not cover trust funds established through the sale of pre-need funeral and burial agreements. In addition, there are no federal minimum standards for pre-need funeral and burial contracts, nor is there a federal requirement for full disclosure of pre-need contract terms and conditions and the risks consumers bear if they cancel a contract. 78