Week 3-Pre-need

Pre-Need

• Also referred to as a "prearrangement." This a term used to describe a plan that is made to guide what is to happen to person's remains after they die.

• Types of funeral arrangements made in advance of need

  • Pre-planned funeral arrangements- Unfunded, a written plan with directions on what to do when the person dies.

  • Pre-funded funeral arrangements-In addition to a written plan, funding has been prepared in the form of insurance or a funeral trust.

Pre-Need

• Reasons for making funeral arrangements in advance of need

  •  Make personal wishes known

  • Intelligent and informed decisions can be made with less emotion

  • Financial burden is eased

  • Reduction of assets for Medicaid eligibility in the case of pre-funded arrangements

Pre-Need

• Types of contracts

  • Revocable contract- May be terminated by the purchaser at any time prior to the death of the beneficiary

  •  Irrevocable contract- cannot be terminated or

    canceled prior to the death of the beneficiary, common with Medicaid spend downs.

  • Guaranteed contract-services and merchandise will be provided at the time of need for a sum not exceeding the original amount of the contract plus any accruals, regardless of the current prices.

  • Non-guaranteed contract- the cost of the funeral will be

    based upon the current price for services and merchandise at the time death occurs. less the amount pre-paid plus any accruals

    
    

Pre-Need

•  Arrangement conference for pre-funded/pre-planned funerals

  •  Location

    •  Home (refer to FTC “Door-to-Door” Rule)- Also called the Cooling off Rule- gives the buyer 3 days to the cancel a sale when made at any other location other than the funeral home.

    • The rule does not apply:

      • sales that are under $25 made at home

      • Sales that are under $130 made at a temporary location

      • sales made entirely online

      • Sales made in an emergency or sales made because the buyer asked the seller to come to their home.

Pre-Need

•  Presentation and discussion of service and merchandise choices

• State and federal regulations regarding pre-funded/pre-planned funerals.

Pre-Need

•  Comply with the FTC Funeral Rule (See FTC Outline, BM 5)

  •  Presentation of price lists- GPL, CPL, OBCPL

  •  Permission to embalm

  • 16 Mandatory disclosures

Pre-Need

• Alterations to prefunded contracts (See Business Law Outline, LRE1-3)

  •  Identify the types of alterations that will not affect a guaranteed contract- What can be changed without voiding the contract?

  •  Identify the types of alterations that may void the contract-What changes will void the contract?

  •  Unavailability of services and/or merchandise- What happens when Goods and services purchased in the preneed are no longer available?

Pre-Need

•  The wishes of the deceased versus the wishes of the authorizing agent

  • Legal effect of the pre-funded contract once death has occurred

  • Rights and duties of the person(s) with the right of disposition

  •  Legal effect of a pre-planned contract

  •  Effect of third-party contracts

• Ultimately, the authorizing agent can choose which parts of the preneed to honor , whether it is prefunded or not.

Pre-Need

•   Types of funding available for pre-funded arrangements

  •  Trust account

    • Individual trust accounts- Trustee manages the assets on behalf of the beneficiary.

    • Master trust accounts-Collectively manages pooled investments

  •  Insurance- provides guaranteed compensation in the event of a loss.

  • Savings/passbook accounts- passes to a named beneficiary.