Take away? No. Challenge the amount being set aside to pay for an expensive funeral? Yes. Funds set aside to pay for a reasonable funeral arrangement are not counted as assets as one qualifies for social services. Your local funeral director can provide counsel regarding the amount local social services agencies consider reasonable and customary to spend on a funeral.
It's not uncommon to have a small processing fee associated with an early payment, but it should not be construed as a "penalty." In the long run, there is usually a good amount of money to be saved by paying off early. Of course, funding agreements vary. Please be sure to check the terms of your (or your proposed) funding agreement for details.
Prior contractual agreements are not voided simply because a change of ownership occurs. The funeral planning agreement you have with the prior ownership is carried forward with successor owners as part of the purchase agreement.
Changes are generally possible, but be careful. When changes are made, they oftentimes affect the terms of guarantees that were created under the original agreement. In the event funds paid toward a funeral plan are excludable resources for purposes of receiving social services (SSI or Medicaid), changing the terms of that agreement could jeopardize one's qualification for assistance. It is not recommended that irrevocably assigned funeral plans be changed in any way.
If you have a prearranged funeral or burial agreement that is comprised of items that are guaranteed to be performed by the funeral home or cemetery at no additional cost to you, the interest (or growth if a life insurance policy) is retained by the funeral home/cemetery to offset the rising costs of those specified goods and services over time. That's the value of prearranging and prefunding at today's costs!
If you decide to prepay your funeral or burial prearrangements, there are generally two methods to assure the funeral home's and/or cemetery's performance. Your money is either used toward a premium to purchase life insurance whereby the policy proceeds will pay for your arrangements, or your funds -- either the entire amount or a portion of them -- will be deposited into a trust fund account to defray the provider's costs. Either method should be disclosed to you or the contract should state whether or not the purchase price is guaranteed; that is, whether you or your family will have to pay additional amounts on the items you have selected in the contract. A guaranteed price contract means that no further payment will ever be required beyond the price stated in the contract for the items you are purchasing.
When you plan ahead, you will be able to compare the many options available. You will be able to compare the services, the products and the prices among different companies. You will have the opportunity to make an informed decision about your funeral and cemetery arrangements, and the form of memorial you prefer. You will be able to make choices that are meaningful to both you and your family, and you will gain peace of mind knowing your family and friends will be relieved of the emotional and financial burden often associated with making arrangements when a death occurs. In addition, by prefunding your funeral and cemetery services, a guaranteed price contract will allow you to purchase at today's prices, free from inflationary pressures in the future. (Check to determine whether prices are guaranteed). Your local funeral, cremation or cemetery provider can help you pre-plan.