Funeral planning mistakes that leave families paying twice

Planning your own funeral is an act of kindness, and most people who do it want one thing: that their family will not be left holding a bill. The cruel irony is that some plans, made with exactly that aim, end up costing the family more, because the money was tied to the wrong place, the wrong promise or the wrong piece of paper. Families call this paying twice: once through the plan, and again out of pocket at the funeral home.

This post goes through seven mistakes that produce that result. For each, you will see how it happens, what it costs and what to do. The dollar figures are hypothetical, chosen to make the arithmetic easy to follow. Prices and rules differ by funeral home and by state.

First, how prepaying works

Most prepaid funeral plans have two parts. One is a funeral purchase agreement with a particular funeral home, listing the goods and services you chose. The other is the funding: either a trust that holds your payment, or a life insurance policy that is assigned to the funeral home so that it is paid when you die. The preneed funeral insurance and funeral contracts guide explains both. The federal Funeral Rule gives you the right to itemized prices and to buy only what you want, but it does not decide how prepaid money is held or refunded. State law does, which is why two people with similar contracts can have very different protection.

Keep those two parts in mind. Nearly every mistake below comes from treating the plan as a single, simple promise when it is two documents with their own terms.

Mistake 1: Prepaying a contract with no clear refund or transfer clause

How it happens. A salesperson explains that prices will rise, that locking in the current price is a bargain, and that the plan is "paid in full." The buyer signs without asking what happens if the plan has to change.

What it costs. Say a widow, Ruth, pays $9,000 to a funeral home near her daughter's house. Three years later she moves to another state to be near her son. She asks for a refund and learns that the contract is irrevocable, or that the home keeps a fee. If she is transferred to a new provider, the new home may accept only the amount the first one releases, and she may be asked to make up the rest.

• Contract price: $9,000.
• Amount released to a new provider after a 10 percent fee (hypothetical): $9,000 - $900 = $8,100.
• Cost of equivalent services at the new provider: $10,500.
• Gap Ruth's family pays: $10,500 - $8,100 = $2,400.

She has paid twice, in the sense that part of her original money went to the fee and her family covers the difference.

What to do. Before signing, ask in writing:

1. Is this contract revocable or irrevocable, and under what conditions can I cancel?
2. If I cancel, what do I get back and what fees are withheld?
3. Can the plan transfer to another funeral home, and what does that cost?
4. If the home closes or is sold, who holds the money and what happens to the contract?

State rules on refunds and transfers vary, so ask your state's funeral board, attorney general or insurance department what protections apply. An elder law attorney can read a contract before you sign.

Mistake 2: Confusing "guaranteed" with "a credit toward the cost"

How it happens. Contracts come in two broad forms. A guaranteed contract promises that the listed goods and services will be provided at no extra charge. A non-guaranteed contract credits a dollar amount toward the funeral, and the family pays whatever the final price is above that amount.

What it costs. If the funeral home's prices rise faster than the funding grows, the family covers the gap. Hypothetically, a $7,500 non-guaranteed credit bought years ago might meet only part of a funeral that now costs $10,200, leaving $2,700 for the family.

What to do. Look for the words "guaranteed" and "non-guaranteed" in the contract itself, not only in the brochure. Ask what happens if prices rise, if the funeral costs less than expected (does the family get the difference or does the home keep it?), and which goods and services are included. Under a guaranteed plan, ask what the guarantee covers: some cover only the funeral home's own goods and services and not third-party charges.

Mistake 3: Overlooking the cemetery and other outside charges

How it happens. A funeral home plan can be complete for what the funeral home sells and still miss everything the home does not sell. The National Funeral Directors Association's 2023 General Price List Study found median funeral home costs of $8,300 for a funeral with viewing and burial and $6,280 with viewing and cremation, and noted that those figures exclude cemetery or crematory charges, a burial vault, a monument or marker, flowers and an obituary notice. See what a funeral costs and how families pay for it for the list.

What it costs. For a burial, the cemetery usually charges separately for the plot, for opening and closing the grave, and often for a required outer container. A marker comes from yet another seller. Hypothetically:

A family that thought the $9,000 prepaid plan covered "the funeral" now owes $6,400 more. They have paid for the funeral twice in the sense that the prepaid money matched only half the bill.

What to do. Ask each seller for a written price list, not just the funeral home. Decide burial or cremation and where. If you already own a plot, put the deed with the plan. Add the outside charges to your planning total. The final expense and funeral cost calculator helps you build the full figure, and a funeral home's General Price List shows only its own part.

Mistake 4: Leaving documents where nobody will look

How it happens. The plan is made, the contract goes into a safe-deposit box or a file labeled "misc," and the only person who knows about it is the planner. After the death, the family calls the closest funeral home, signs a new contract, and pays. Weeks later someone finds the paperwork.

What it costs. The whole prepaid amount, potentially. Depending on the contract, the family might be able to recover money from the first home, but they may not, and refunds after a service has been provided elsewhere can be slow or partial. It is one of the more preventable forms of paying twice.

What to do.

• Give your executor and at least one family member a copy of the contract, the insurance policy or trust paperwork, and the funeral home's phone number.
• Put a one-page summary on top: who the funeral home is, what is paid for, where the originals are, and which insurer or trustee holds the money.
• Label the envelope plainly: "Funeral arrangements and prepayment."
• Tell the family where the cemetery deed and any veterans' paperwork are.
• A safe-deposit box can be hard to open after a death, so keep copies elsewhere.

The same applies to ordinary life insurance. If your family does not know a policy exists, no one files a claim. The lost life insurance policy finder exists for exactly that situation, but it is easier to leave a note.

Mistake 5: Naming a funeral home as the beneficiary of a policy

How it happens. The agent or salesperson says that making the funeral home the beneficiary guarantees the funeral is taken care of. Sometimes the arrangement is an assignment of the policy rather than a beneficiary designation, but the effect is similar: the money goes to the funeral home, not to your family.

What it costs. Flexibility. If the funeral ends up costing less than the policy pays, the family may or may not receive the difference, depending on the terms. If the family wants a different funeral home, they may be locked in or must go through a transfer. If the policy was meant to cover other expenses too, such as final medical bills or travel, none of that money reaches the people who need it.

What to do. Compare an assignment with the alternative of naming a person as beneficiary and giving them clear written wishes. The assigning life insurance to a funeral home guide lays out the trade-offs. There are good reasons some families choose assignment, including certainty of payment to the funeral home, but there are also reasons to prefer a family member who can choose. If you assign, ask in writing whether leftover funds go to your family.

Mistake 6: Paying in more than one way for the same costs

How it happens. A person buys a small burial policy, then a preneed contract, then is talked into a third product. Or a couple prepays at a funeral home and also keeps a final expense policy meant for the same funeral. Nobody tracks that these now overlap.

What it costs. Premiums or payments on coverage that exceeds the need. Sometimes it also costs delays, because the family does not know which source to use first.

What to do. List every source of funeral money in one place: policies, prepaid contracts, savings, payable-on-death accounts, veterans' benefits and the Social Security lump-sum payment, which is $255 for a spouse or some children. Decide on purpose which pays for what. The burial insurance vs final expense vs preneed guide shows how the three products differ, and the post what to bring and ask on a funeral home visit covers what to ask when you meet a funeral home.

Mistake 7: Ignoring Medicaid, insurer safety and the free-look window

How it happens. Three separate details get skipped because they are boring.

• Medicaid. Some states treat certain irrevocable prepaid funeral arrangements as exempt from the asset limit for long-term care eligibility, and some do not. The rule is state-specific and changes. A person who might need Medicaid should ask an elder law attorney or the state agency before buying. See medicaid eligibility and life insurance cash value.
• The insurer. When the plan is funded by an insurance policy, the policy's safety rests on the insurer. Your state's guaranty association may protect the policy if the insurer fails, up to limits that vary by state.
• The free-look period. For an insurance-funded plan, the free-look period typically lasts 10 to 30 days, longer in some states, and lets you return the policy for a refund.

What it costs. A prepaid plan that disqualifies someone from benefits, or fails with an insurer, or cannot be undone after a clear error. What to do: ask each question before signing, and use the free-look days to read the contract at home, not at the sales table.

If the plan turns up after the funeral

Sometimes a family finds the paperwork too late. The steps below do not guarantee a refund, but they give the best chance of recovering money.

1. Read the contract first. Look for the cancellation, refund and transfer sections, and note any deadlines.
2. Call the original funeral home and the insurer or trustee, and ask in writing what, if anything, is owed back when services were provided elsewhere. The answer depends on the contract and on state law.
3. Keep every receipt and the itemized statement from the funeral home that actually provided the services.
4. Ask your state's funeral board, attorney general or insurance department whether the contract's refund terms comply with state rules. If the plan was funded by insurance, the insurance department is the right place for a complaint.
5. Consider an attorney if a significant sum is at stake and the provider will not respond.

Even in the best case this takes weeks, which is why prevention matters far more than repair.

A short worked comparison

Say Hal and Joan are weighing a $9,000 prepaid plan against setting aside the same sum themselves. These are invented numbers for the sake of the arithmetic.

• Prepaid plan, guaranteed, transferable with a fee. The family knows the funeral home's part is covered. Outside costs of $6,400 (from the table above) remain. Total cost to the family at death: $6,400, plus nothing for the funeral home's portion.
• Savings account with a named payable-on-death beneficiary. The $9,000 sits in a bank. At death the full $9,000 is available to the named person without waiting for probate. If the funeral home's charges have risen to $10,000, the family pays $1,000 more, and the outside costs of $6,400 come out of the same account, so the account covers $9,000 of the total $16,400 and the family finds $7,400. If the funeral is cheaper or they choose cremation, the family keeps the difference.

Neither is plainly better. The plan buys price certainty and a decided arrangement, at the cost of flexibility and the risk of a bad contract. The savings account buys flexibility and costs nothing to cancel, at the cost of price risk and the chance that the money gets spent on something else. Which suits you depends on how much you trust the provider, how likely you are to move, and whether Medicaid planning may matter.

A pre-signing list

Take this to any funeral home or agent:

1. Get the General Price List and compare at least two homes.
2. Ask whether the contract is guaranteed, revocable and transferable.
3. Ask who holds the money, in writing, by name.
4. Ask what is not included, especially cemetery and third-party charges.
5. Ask what happens to leftover funds.
6. Share copies with family and your executor the same week.
7. Revisit the plan every few years, and after any move, divorce or death in the family.

Salespeople who push you to sign the same day, say that preneed is required by law, or ask for payment by wire or gift card are showing the warning signs described in the guides. Walk away and call your state's attorney general or insurance department.

For a comparison of how families actually come up with the money when they have no plan, see four households, four ways to pay for a funeral.

Key takeaways

• A prepaid plan is two documents, a funeral purchase agreement and a funding method, and each has its own refund, transfer and guarantee terms.
• A "guaranteed" contract and a dollar credit toward the funeral are very different promises; ask which one you are buying and what it leaves out.
• Cemetery, vault, marker, flowers and obituary charges usually sit outside the funeral home's contract, so budget them separately.
• A plan nobody knows about gets ignored; give your executor and a family member the contract, the funding paperwork and the funeral home's number.
• Compare assigning a policy to a funeral home with naming a person, and check Medicaid, insurer safety and the free-look window before you sign.