Can I freeze the cost of funeral services and cemetery property at today’s prices, even if it is not used for decades? What guarantee do I have that the arranged goods and services will be provided?
Cemetery property and services, such as lots or crypts, vaults, caskets, memorials, cremation processes and opening/closing fees can be purchased in advance of need from the cemetery, locking in the price paid. For-profit cemeteries are required by the Maryland Office of Cemetery Oversight to deposit into a perpetual care escrow fund (the principal of this fund cannot be accessed). The interest from this fund provides for the future care of the cemetery. When the cemetery sells merchandise pre-need, such as caskets, memorials, or vaults, it is required to escrow a large percentage of those funds to ensure future delivery of the merchandise. For-profit cemeteries in Maryland are also required by the Office of Cemetery Oversight to have the merchandising trust and perpetual care accounts certified biannually by a CPA. Church cemeteries and non-profit cemeteries in Maryland are exempt from the Office of Cemetery Oversight’s jurisdiction.
Funeral homes in Maryland are regulated by the Morticians Board, a State entity that does not regulate cemeteries. Funeral homes, unlike cemeteries, are not permitted to accept payment for services they have not yet provided. To arrange funeral services in advance, a funding vehicle, such as a trust account or insurance policy must be used.
Insurance policies are better than trust accounts because:
1. There is already a State-mandated guarantee fund that insurance companies doing business in to Maryland pay into to ensure payment of claims in the unlikely event of an insurance company folding.
2. Trust accounts earn interest every year, and the purchaser is responsible for paying tax on the interest income. You do not pay tax on insurance policies as they grow.
3. Trust accounts do not have an insurance benefit that pays the funeral in full if the purchaser dies while still making payments.
Final expense insurance can be purchased from a licensed insurance agent and may be used at any funeral home. A specific funeral can also be pre-arranged and pre-funded by this method, when a licensed mortician signs the pre-need funeral contract on behalf of a licensed funeral establishment.