Buyer Beware - Be Cautious of the Wolf in Sheep's Clothing

By: Daryl Berry
Saturday, September 16, 2017

Buyer Beware - Be Cautious of the Wolf in Sheep's Clothing

Perhaps you read on Facebook as I did, of the funeral director and his wife in western Kentucky that were indicted for mishandling money that their clientele had entrusted them with to pay for future funeral expenses.  Sadly, this kind of thing has happened before and when it does, it puts doubt in peoples' minds about funeral directors.

 Planning ahead for funeral expenses is a wise decision and I encourage you to read more about the benefits on our website at www.lyondewittberry.com .  Through the years many folks have trusted their funeral director to handle such arrangements without an issue but the opportunity exists for abuse of this trust. 

Funeral directors are some of the most trusted people in the community but unfortunately good people at times will make poor decisions.  Most funeral homes are small businesses with big expenses.  I have heard of an instance where a funeral home had a large payment due and business had been a little slow.  Someone came in and prepaid for their funeral so they had the money to make that big loan payment.  The upstanding funeral director didn’t want to be late with his loan payment so he “borrowed” the preneed money with every intent of replacing it when cash flow improved.

The problem with that is the law states that money paid for prepaid burial expenses must be set aside, most commonly in a trust or life insurance product, and cannot be used by the funeral director until the services are performed.  Unfortunately, an unscrupulous funeral director may do this a time or two but the next time they get behind they go back to that well again when someone else prefunds a funeral.  It gets easier every time they do it until it becomes a way of life.  What happens next is that somehow a family finds out that the money they paid the funeral director can’t be accounted for and you read about it on Facebook when they get caught.

Again, I say, prefunding a funeral is a wise decision.  Many people do so privately through conventional life insurance.  This is all well and good but there is probably not a contractual agreement with the funeral home as to exactly what type of services and merchandise that you desire.  Some folks will bring a life insurance policy to the funeral home to be placed on file so that the funeral director knows that there are funds available to pay for their funeral.  If you choose to do so, keep a copy for your records.  Unfortunately, things happen and files get destroyed or misplaced. 

I can remember one case when I worked in another town where a family came in to make funeral arrangements when their mother died.  They knew everthing had been preplanned because they were with her when the arrangements were made.  We tore the place apart looking for the file.  Fortunately the family had their copies of the documents and we were able to carry out her wishes.  The file was found along with a couple others in the bottom of the file cabinet where they had fallen at some point.

I don’t know how many times through the 30+ years that I have met with families that families do not have a clue where to find their loved one’s insurance documents.  If you are a son or daughter and will be entrusted with taking care of the arrangements for your parents, check these things out.  Find out where they keep their paperwork.  If you understand that they have a prearrangement at a funeral home, check it out to find out what arrangements are in place.  I have met with several down through the years who thought that everything was taken care of and find out when they were grieving that nothing was officially recorded.  The deceased may have had a conversation with their funeral director that they wanted the same arrangements as their mother and in their mind they had made their arrangements but in reality nothing was put down on paper. 

There are ways to protect yourself.  If you are making prearrangements with a funeral director, make sure that you receive documentation, either an insurance policy or Funeral Trust Agreement.  If the prefunding is through an insurance policy, make sure that the person selling you the prearrangement is a licensed insurance agent.  If there is a contract stating terms of the funeral agreement, make sure that the person is a licensed funeral director.

Normally, prearrangements made with a funeral home in which payments are made, include a contract that specifies the terms of the prearrangement.  It will spell out what services and merchandise are included and if there are any price guarantees in place.  Many funeral funding products have a provision for growth that is meant to offset inflationary increase in funeral prices.  This is one thing that makes prefunding through a funeral director a wise choice as it can guarantee that future price increases will be covered by this growth.

I have known of funeral directors that sold preneed policies and they placed the policy in the clients file when it came in from the insurance company.  Their client never received any paper work to prove the transaction.  Our policy is to keep a copy of the policy and deliver the original policy to the policy owner.  This assures you that the money was placed where we said we would put it when we said we were going to do it.  If you have questions about arrangements that you or a loved one have made I encourage you to check it out with your funeral home.  I would be suspicious if they cannot document the arrangements.

Remember that any money that you pay a funeral director in advance is still your money.  The funeral home has no right to it until they provide the services.  This protects you in case the funeral home should ever go out of business or change hands.  It also means that you can move your arrangements and the funds will be paid to the funeral home of your choice.  Another funeral does not have to honor the terms of the funeral contract, but the funds are still yours until services are performed.

To summarize, here are steps to protect yourself and your money when pre-funding a funeral.

  • Make the check payable to the insurance company or trust fund not the funeral home.  At Lyon-Dewitt-Berry Funeral Home we always ask that you make the check to the Life Insurance Company that we trust to handle your money.
  • If you provide a life insurance policy to a funeral home for safekeeping, give them a copy and you keep the original.  If you bring us a policy we will ask you to sign an agreement stating that the policy is intended to pay for the funeral at the price at the time of death. It also states that we pay to the beneficiary any amount in excess or that we will be due additional payment if the policy does not cover the services you select.
  • Make sure that you receive the documents that spell out the terms of the agreement.  We will always give you copies of the contract that you sign with us.  If a life insurance product is involved, we will provide you with the policy and keep a copy in our file.
  • If you have already made funeral arrangements in the past, visit the funeral home to verify what arrangements have been made.   Should you not have anything proving the prearrangement exists, ask for copies of the paperwork.
  • Tell your loved ones that you have made prearrangements and where the documents are kept.  Do not place the documents in a safe deposit box as they will not be readily accessible at the time.
  • Purchase your funeral merchandise from the funeral home.  Here at Lyon-Dewitt-Berry, we offer a significant discount on our services when you purchase services and merchandise as a package.  Typically, our prices for caskets and vaults are lower than what you may be offered by a cemetery.  Should you find a lower price, with written documentation, we offer a price match guarantee.

 

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