Prepaid cremation plans

Prepaying is two separate decisions, and most people make only one of them.

The first is what you want done. That decision is free, it is reversible, and it helps your family whether you ever prepay or not.

The second is handing a company money years before it does the work. That is a financial decision with real risk, governed by your state, and it deserves the questions below before anyone signs anything.

Make the first decision now. Make the second one slowly, or not at all.

The federal rule protects the conversation, not the money

There is a widespread belief that the FTC Funeral Rule protects prepaid funeral money. It does not. The rule is a price-disclosure and unbundling rule. Read the whole of 16 CFR Part 453 and the words "preneed," "prepaid," and "prearrangement" do not appear anywhere in it. There is no federal trust requirement, no federal refund right, and no federal protection if the business fails.

The opposite claim is also wrong. The rule does apply when you preplan. The FTC's own compliance guidance states that "the Rule's requirements apply to both pre-need and at-need funeral arrangements" and that a provider "must give out a General Price List in all pre-need situations."

The accurate line is narrow and worth holding onto:

The federal rule governs the sales conversation. Your state governs the money.

That also means the price list obligation follows the salesperson. It applies "whether the discussion takes place in the funeral home or elsewhere", including a kitchen table, a seminar, or a retirement community dining room. It also covers someone who sells preneed contracts on a funeral home's behalf without providing the goods themselves. If a person is discussing prices with you and has not handed you a printed price list to keep, that is the first thing to correct.

Where the money goes: two mechanisms

Prepaid contracts are funded one of two ways. Which one you have changes who holds your money and who you call when something goes wrong.

Trust-funded. Your payments go into a trust or restricted account. Michigan's financial regulator describes it plainly: payments are "made to the seller," who must then deposit them. The share that has to be deposited is set by state law and is not always all of it.

Insurance-funded. Your payments buy a life insurance policy or annuity, with the death benefit assigned to the funeral home. Michigan again: payments are "not made to the seller but to the insurance company that is funding the contract."

There is a third arrangement in some states worth asking about, because it is the consumer-friendly version. Virginia law allows a person to establish the irrevocable trust themselves, naming the funeral provider as beneficiary, and in that structure the person "shall have the right to change the beneficiary to another funeral provider." You own the trust. You can change your mind about the provider. Ask whether your state allows it.

Ask which one you are being sold, and get the answer in writing. Ohio requires trust-funded contracts to carry a notice telling you that you will be informed when the trustee receives your deposit, and that if no notice arrives within sixty days, you should contact the trustee directly. That is a good habit in any state.

How much of your money is actually protected

Not all of it, in some states. The percentage that must go into trust is set by state statute and the spread is wide.

State	What must be trusted
New York	100%, held in your name, interest credited to you, repayable on demand before delivery
Washington	90% of the cash purchase price; the funeral home may keep up to 10%
Florida	70% of services, 100% of cash advance items, and for merchandise the greater of 30% of price or 110% of wholesale cost
Ohio	No headline deposit percentage, but an initial service fee capped at 10%

Drawn from RCW 18.39.250, N.Y. Gen. Bus. Law § 453, Fla. Stat. § 497.458, and Ohio Rev. Code § 4717.36. These are four states of fifty, chosen because they show the range. Look up your own before you decide anything.

The practical reading: in some states every dollar is held for you and earns interest in your name. In others, a tenth of it is legally the funeral home's from the day you sign.

"Guaranteed" describes the price, not your money

This is the most useful distinction in the whole subject, and the word does a lot of quiet work in a sales conversation.

On a guaranteed contract, the provider must deliver the goods and services listed "without regard to the actual cost of such funeral goods and funeral services prevailing at the time of performance." The price is locked. The provider also keeps any money left over.

On a nonguaranteed contract, your funds are applied to "the retail prices in effect at the time of the funeral." If prices have risen and the money falls short, the Ohio statute is blunt about what happens: the seller "shall not be required to perform until payment arrangements satisfactory to the seller have been made."

Read that as your family would experience it. The surplus belongs to the company. The shortfall belongs to your family, and it is discovered in the first day or two after you die, which is the worst possible moment to negotiate.

Never accept "prepaying locks in today's price" without asking which kind of contract you are signing.

If the funeral home closes, sells, or you move

Prepaid money is not federally insured and it is not guaranteed. The FTC's own consumer page says protections "vary widely from state to state, and some state laws offer little or no effective protection."

Some states run a fund for exactly this. Both of the ones we checked tell you plainly not to count on being made whole.

Ohio's Preneed Recovery Fund covers loss from "malfeasance, misfeasance, default, failure, or insolvency," but only where the loss is not otherwise covered, and the statute states that "all payments shall be a matter of privilege and not of right."

Florida's Preneed Funeral Contract Consumer Protection Trust Fund takes claims when a seller "goes out of business and/or becomes insolvent and will not or cannot perform." Its own consumer page says the amount paid "is never more (and is often less) than the net amount actually paid for the preneed contract."

Transferring a contract is possible in many states but rarely free. Ohio permits the original seller to collect a transfer fee "up to ten per cent of the value of the assets of the trust." Michigan's manual treats a transfer as "an issue between the purchaser, contract seller and funeral provider", the state is not arranging it for you. Virginia requires contracts to disclose "any penalties or restrictions, including but not limited to geographic restrictions."

If you move across the country, assume the contract does not move with you until someone shows you in writing that it does.

The clause that can override everything you paid for

Ohio requires preneed contracts to carry this notice in boldface:

Under Ohio law, the person holding the right of disposition of the remains of the individual contract beneficiary ... will have the right to make funeral arrangements inconsistent with the arrangements set forth in this contract.

A paid contract does not necessarily bind the person who legally controls what happens to your body. Who that person is differs by state, and it is frequently not the person you assumed.

This is why the wishes decision matters more than the money decision. Paying in advance does not put the question beyond argument. Telling the right person, in writing, and making sure they know where the paperwork is, does more work than the payment does.

Revocable, irrevocable, and the Medicaid trade

A revocable contract can be cancelled and the money returned, possibly less a fee. An irrevocable one cannot. People make a contract irrevocable for one main reason: to spend down assets so the money is not counted for Medicaid eligibility.

If that is your reason, get advice specific to your state before signing, because the federal rule is commonly described backwards.

Under 20 CFR 416.1231, the $1,500 burial funds exclusion applies to revocable arrangements. An irrevocable trust does not stack on top of it, the regulation says the $1,500 exclusion "must be reduced by ... amounts in an irrevocable trust (or other irrevocable arrangement) available to meet the burial expenses." The exclusion with no dollar cap is a different one: the burial space exclusion, covering plots, vaults, markers, and opening and closing of the grave.

State caps on irrevocable funeral contracts vary sharply. Wisconsin's handbook caps the irrevocable portion at $4,500. Michigan's manual sets a maximum principal value of $16,100 effective 1 June 2026, indexed annually. Two neighbouring states, more than a threefold difference. There is no national number, and anyone who quotes you one is guessing.

Michigan also notes a rule people trip over: only a guaranteed price contract may be certified irrevocable.

Before you sign

The FTC asks six questions. They are the right six.

• What are you paying for, merchandise only, or services as well?
• What happens to the money you have prepaid?
• What happens to the interest income on money put into a trust account?
• Are you protected if the firm you dealt with goes out of business?
• Can you cancel the contract and get a full refund if you change your mind?
• What happens if you move to a different area or die while away from home?

Add five more, drawn from the state laws above:

• Is this contract guaranteed or nonguaranteed? Get the answer in writing.
• Is it trust-funded or insurance-funded, and who holds the money?
• What percentage of my payment is deposited, and what do you keep?
• What is the transfer fee if I move or change providers?
• Does my state have a recovery fund, and what does it actually pay?

Cancellation rights are real but time-limited. Washington requires a full refund if you cancel within thirty days of signing. Virginia refunds everything paid plus interest within thirty days, but after that only the amounts required to be deposited. Ohio has a seven-day right to cancel. These rights generally disappear once a contract is made irrevocable. That is the trade.

What to do first

Write down what you want. Give a copy to the person who will be asked. Find out who holds the right of disposition in your state, and make sure that is the person who has your instructions.

Then, if prepaying still looks right, get three itemized price lists, compare the same lines, and ask the eleven questions above before any money moves.

Wishes first. Money last, if at all.

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Before the Funeral Home has a page for what you want in one page, a page that separates prepaid, pre-need, and payable-on-death, and the questions to ask before anyone signs. See what is inside