Published in print: Thursday, October 16, 2014
By Chad Cain for the Daily Hampshire Gazette
NORTHAMPTON — A visit to a funeral home early Wednesday to pay respects to a friend got Claudia E. Hodges thinking hard about what kind of funeral she wants after she dies — and how she might pay for it. It’s not a pleasant topic, but it is an essential one that the 80-year-old Northampton resident no longer wants to put off.
“I’ve been thinking about it for quite a few years,” Hodges said shortly after a 90-minute funeral planning forum at the Rockridge Retirement Community. “When you get to the age I am, you have to be realistic. It makes you realize you have to do something about it now.”
Though age certainly played a factor in her decision to attend the forum sponsored by the Funeral Consumers Alliance of Western Massachusetts, Hodges said recent headlines about the demise of the Ryder Funeral Home in South Hadley also prompted her to do some research. “I told the funeral director that I would be back in two or three weeks after I attended this forum,” Hodges said. Hodges is exactly the type of person the Funeral Consumers Alliance hoped to attract to the forum, which sought to help people become “savvy consumers” when it comes to funeral planning, just as they are when making other big life purchases, said Sandy Ward, president of the alliance. She said the sudden closure of Ryder Funeral Home and news that more than 60 families who signed prepaid funeral contracts may have lost their money prompted Wednesday’s forum.
“Every dollar you prepay to a funeral home has to be guaranteed”
Ward served on a panel of experts along with Morgan Mitchell, funeral director of Mitchell Funeral Home in Easthampton, and Seunghee Cha, an elder law attorney in Amherst. The panelists sought to dispel myths about funeral prepayment plans and outlined legal and financial aspects of funeral planning. Mitchell, who is past president and a current member of the state Board of Funeral Directors and Embalmers, told roughly 25 people in attendance that consumers considering whether to sign a prepaid contract should remember that it’s their money, not the funeral directors. “Every dollar you prepay to a funeral home has to be guaranteed,” the fourth-generation funeral director said.
By state law, funeral homes are required to invest the money consumers give them for prepaid contracts into a trust fund or insurance policy. They are not allowed to keep it, though many consumers might not know that or simply end up trusting a funeral home director to treat them fairly, Mitchell said. In light of recent alleged mishandling of $342,000 for prepaid funeral services by former funeral director William Ryder, the Board of Funeral Directors and Embalmers is considering regulatory changes that would stop consumers paying funeral directors or funeral homes in advance for funeral service arrangements, and direct the money instead to the insurance or trust companies where it is supposed to be invested. “I have not done anything for you when I sit down and talk to you,” Mitchell said. “You should not be writing me a check.”
Consumers, he noted, are equally responsible for doing their research, for figuring out what arrangements they’d like for their funeral, and for knowing what they can afford. This is part of what it takes to become a savvy consumer, he said. “Talking about funerals and arrangements is one of the most difficult things to do,” Mitchell said. “Funeral directors should help plan arrangements, but you are the only ones that can understand what your finances are.” Once a consumer knows what arrangements they want and what they can afford, Cha advises that they price shop just as they would for other big purchases.
State law requires a funeral home to provide a general price list to anyone who asks for one. The Funeral Consumers Alliance produces a funeral home price survey every two years that some consumers might find helpful, Ward said. That survey was released this week on the group’s website. After people know roughly what they want to pay for funeral services, Cha detailed two main ways they can go about doing this: by setting aside money or by prepaying. In terms of setting aside money, she said the simplest thing consumers can do is ask their bank to designate a new or existing checking or savings account as a “burial account” so that it’s clear what the money is to be used for when they die. People who want to be even more clear about what the money is for can fill out a pay-on-death designation form that names a beneficiary, or they can make it a joint burial account by adding someone else, Cha said. “It’s really meant to be a set-aside fund for your funeral expenses,” Cha said. “It’s that easy. If your budget is $3,000, then you put that in it.”
There is one caveat, however. Cha said people should be aware that if they ever need nursing or long-term care and are going to apply for Medicaid or Mass Health to pay for it, they will only be allowed to set aside $1,500 in a burial account. Using her $3,000 example, Cha said people faced with this scenario would simply pull out half of the money in that account in order to apply for Medicaid. Another way to pay for a funeral is to establish a CD, or certificate of deposit, account that will accrue interest at a better rate than a checking account. Cha advised people who establish a CD for funeral expenses to write a letter or memo stating the purpose of the account, naming a beneficiary or adding a joint owner. Consumers who want to do more planning and ensure that the money they set aside for funeral expenses is used for exactly that might want to consider a prepaid contract. Under these contracts, funeral homes must invest the money through a trust or insurance policy to pay for future funeral expenses.
“Use your common sense and read the fine print”
The idea is that these investments gain enough annual interest to cover cost-of-living increases. There are several details consumers should be aware of. Prepaid contracts that are “cost protected” ensure against rising future costs for a variety of arrangements, while contracts without this feature may mean that a person’s estate will get a bill for expenditures beyond the prepaid amount. The first 15 days after signing a pre-need contract are critical. Consumers have a so-called “cooling off” period of 10 days to change their mind and cancel a contract for any reason. Once that time period ends, funeral homes have five more days to invest the money. In the end, Cha advises consumers to read contracts carefully and understand what they say before they sign. That’s exactly what Hodges, the 80-year-old Northampton resident who attended Wednesday’s forum, and her daughter, Kathy Rarus, took away from the meeting. “Use your common sense and read the fine print,” Rarus said.