Why pre-plan?
One of the most difficult times in life doesn't have to be wrought with last-minute decisions that lead to additional stress. Pre-planning a funeral offers a number of benefits ­ primarily that it provides peace of mind for the planner and his/her family. It also lifts the burden on family members during the grieving process and prevents them from having to make important ­ and expensive ­ decisions on their own.

Consumer advocates, funeral directors and families alike recommend pre-planning. In fact, consumers in New York state have some of the strongest rights in the nation. PrePlan, the funeral funding program established by the New York State Funeral Director's Association (NYSFDA) in 1998, allows consumers to set money aside securely and safely prior to the time of death.

It is not uncommon for funeral homes to increase their rates at least once per year, generally between 3 percent and 5 percent. However, pre-planning guarantees funeral home costs at the time of the arrangement, regardless of when the death occurs.

Such costs can include body transfer, operational fees, use of funeral home facilities and transportation (hearse). Pre-planning also helps to offset the rate of inflation at the time of death.

There are certain costs, however, that are not guaranteed, including cemetery charges, death certificates, clergy and other cash advances, which are monies paid by the funeral director on behalf of the family or individual.

Arrangements: revocable and irrevocable
There are two types of pre-planned funeral arrangements: revocable and irrevocable. Revocable arrangements are established primarily for peace of mind and allow the planner to collect interest on funds deposited into the PrePlan fund. In 2006, the annual net consumer yield in the fund was 3.71 percent. The December 2006 monthly net consumer yield was 3.81 percent. However, PrePlan account holders must also pay tax on interest accrued.

Consumers opting to open a PrePlan account may also withdraw funds from the account without penalty. However, interest accrued on the account helps to offset price inflations, so withdrawal is not typical. One major benefit of withdrawal, though, is that the monies can serve as a “safety net” for the account holder if and when funds are withdrawn.

For those seeking Medicaid eligibility and coverage while pre-planning a funeral, New York state requires that the arrangement be irrevocable. For an irrevocable arrangement, the individual must have no more than $4,200 (the 2007 limit) in noncountable assets, which are those assets not taken into consideration when determining if an individual qualifies for Medicaid.

The value of an irrevocable pre-paid plan is excluded in determining whether an individual qualifies for Medicaid benefits. Therefore, an individual with more than the $4,200 limit may spend-down assets to $4,200 or less by purchasing an irrevocable pre-planned funeral arrangement.

Changes to an irrevocable funeral arrangement can be made prior to the death of the individual, but funds may not be withdrawn. Additionally, any funds in excess of the final funeral contract from an irrevocable arrangement are paid back to the county where and when the death occurred.

It is imperative that consumers not only know their rights when planning a funeral, but that they also understand the laws surrounding funeral arrangements. Be sure to gather information from trusted sources. When it comes to arranging a funeral, it truly pays to make an informed decision.

Michael L. Rosenthal is the owner and manager of Rosenthal Memorial Chapel in Pleasantville. Reach him at Michael@rosenthalmemorial.com.
Kevin Cohen is managing partner of The Law Offices of Kevin H. Cohen in White Plains. Reach him at kcohen@estatelawny.com.

Pre-funding Checklist

Did you receive a copy of the funeral home's General Price List?

Did you receive a copy of the itemization statement and pre-need agreement you signed with the funeral home?

If you are currently receiving or have applied for Medicaid, did you sign an Irrevocable Agreement? (By law, you must and this means any money left over after the performance of the funeral will be returned to the local Department of Social Services.)

Did you receive a confirmation statement of the money you left as a deposit within 30 days of that deposit being made?

Was this deposit made within 10 days of the date you signed your agreement?

Does the name of the depository (i.e. financial institution) appear on the confirmation?

Was your money placed in an interest bearing account or a government-backed investment, such as U.S. Treasury bonds?

If and when you make additional deposits to this account, did you receive a confirmation statement of such deposit?

Did you receive an annual statement (at year-end) of your account activity, including interest payments? (The money is always yours and, therefore, you are responsible for paying income taxes.)

Source: New York State Tribute Foundation and the New York State Funeral Directors Association, www.nysfda.org or 800-291-2629.

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