The short answer
A prepaid funeral plan is a contract with a funeral home. You choose your funeral now and pay for it ahead of time, in one payment or over time. Look for a plan that helps protect your money in a trust or insurance policy, lets you cancel or transfer it, and lists exactly what is included. State protections vary widely.
Key takeaways
- A "burial plan" can mean a prepaid funeral contract, preneed insurance, or final expense insurance, so ask which one you are being sold.
- Prepaid plans are usually funded by a trust or by a preneed insurance policy, and state laws on protecting that money vary widely.
- The FTC Funeral Rule gives you the right to itemized prices and to buy only what you want, whether you plan ahead or at the time of death.
- A prepaid plan ties you to one funeral home; burial insurance pays cash to a person you choose.
- Always tell your family about a prepaid plan, or they may pay for the same funeral twice.
What is a burial plan? Three things with one name
Ads use "burial plan" and "funeral plan" loosely. Before you sign anything, find out which of these you are being offered:
| Product | Who gets paid | What you choose now | Learn more |
|---|---|---|---|
| Prepaid funeral contract, funded by a trust | The funeral home | The specific funeral | This page and burial trust funds |
| Prepaid funeral contract, funded by preneed insurance | The funeral home | The specific funeral | Preneed insurance |
| Final expense (burial) insurance | A person you name, in cash | Only the amount of coverage | Final expense insurance |
The first two are prepaid funeral plans. The third is a type of life insurance and is not tied to any funeral home.
How prepaid funeral plans work
- You meet with a funeral home and choose the goods and services you want, such as a casket, viewing, or cremation.
- The funeral home gives you a price and a written contract.
- You pay in full or in payments.
- The money goes into a trust or pays for a preneed insurance policy, depending on the plan and your state.
- When you die, the funeral home provides the funeral in the contract and is paid from the trust or policy.
The FTC notes that some state laws require the funeral home or cemetery to put a percentage of your prepayment in a state-regulated trust, or to buy a life insurance policy. How much is protected depends on your state.
Guaranteed vs. non-guaranteed prices
Ask whether your plan locks in prices.
- Guaranteed items: The funeral home agrees to provide these goods and services at no extra cost later, even if prices rise.
- Non-guaranteed items: Your money is credited toward them, but your family may owe more if prices go up.
- Cash advance items: Things the funeral home buys from others for you, such as death certificates, obituary notices, or flowers. These are often not price-locked.
Cemetery costs such as a plot, opening and closing the grave, and a headstone are often sold separately by the cemetery. They may not be part of a funeral home plan at all.
Your rights under the FTC Funeral Rule
The Federal Trade Commission's Funeral Rule applies whether you arrange a funeral in advance or at the time of death. It gives you the right to:
- Buy only the goods and services you want, not a required package.
- Get price information over the phone.
- Get a written, itemized price list when you visit a funeral home.
- See a casket price list and an outer burial container price list before you see the items.
- Get a written statement of what you are buying before you pay.
- Use an alternative container, instead of a casket, for cremation.
- Provide your own casket or urn without being charged a handling fee.
The Funeral Rule covers prices and disclosures. It does not decide how prepaid money is protected; state law does. It also does not apply to third-party sellers, such as casket and monument dealers, or to cemeteries without an on-site funeral home.
How to choose a prepaid funeral plan
Choosing a prepaid funeral plan is less about a brand and more about the contract. Look for a contract that answers these questions clearly, in writing:
| Check | What good looks like |
|---|---|
| Where the money goes | A state-regulated trust or a preneed insurance policy, named in the contract |
| Price guarantee | Clear list of which items are guaranteed and which are not |
| Cancellation | You can cancel and get your money back, with any fees stated |
| Transfer | You can move the plan to another funeral home or state, with any fees stated |
| Business failure | The contract explains how your money is protected if the funeral home closes or is sold |
| Leftover money | Any excess goes to your estate or family |
| Seller license | The seller is licensed under your state's preneed or insurance rules |
To compare funeral plans, ask two or three funeral homes for their itemized price lists for the same funeral. Prices for the same service can differ a lot between funeral homes. Our funeral cost calculator can help you estimate.
What state protections can look like: the New York example
Because state law, not federal law, protects prepaid money, it helps to see what strong rules look like. New York's Department of Health describes these consumer rights for prepaid funeral agreements in that state:
| Topic | New York rule, as described by the state |
|---|---|
| Where the money goes | Deposited within 10 days in an interest-bearing account or government-backed investment; you are told where within 30 days |
| Paperwork before you choose | A General Price List, a Pre-Need Itemization Statement, and a written Pre-Need Agreement that says whether the funeral is guaranteed |
| Interest and taxes | Reported to you each year; you owe income tax on it |
| Cancelling a revocable agreement | Withdraw the money and interest at any time, with no processing fees or penalties |
| Irrevocable agreements | Generally for Medicaid or certain SSI-related applicants; cannot be refunded; leftover money goes to the county |
| If the funeral home is sold or closes | Written notice if sold; if it closes, money is returned with interest or moved where you direct |
Ask your state insurance department, attorney general, or funeral board which of these protections apply where you live. For trust-funded plans, see burial trust funds.
Prepaid funeral plan vs. burial insurance
| Feature | Prepaid funeral plan | Final expense insurance |
|---|---|---|
| Who gets the money | The funeral home | The beneficiary you name |
| What it pays for | The goods and services in the contract | Anything your beneficiary chooses |
| Choice of funeral home | Tied to one funeral home | Any funeral home |
| Price protection | May lock in some prices | Fixed dollar amount; may cover less as prices rise |
| If you move | May or may not transfer, sometimes for a fee | Goes with you |
| Health questions | Often none | Depends on policy type |
| Who regulates it | State law, which varies | State insurance department |
Example (hypothetical): Two sisters each set aside money for a funeral. One prepays a plan at her local funeral home. The other buys a burial insurance policy. Years later, both move across the country to live near family. The first must ask whether her plan can transfer and what it costs. The second's policy pays her beneficiary wherever she lives.
Things to consider before prepaying a funeral, and who it is not for
- The funeral home could close or be sold. Ask what protects your money if that happens.
- You might move or die away from home. The FTC notes that some plans can be transferred, but often at an added cost.
- You might change your mind. Ask whether you can cancel and get a full refund.
- State protection varies. The FTC warns that protections vary widely, and some state laws offer little or no effective protection.
- Your family may not know about it. If they do not know, they might pay for the same funeral again.
Prepaying is optional. The FTC notes you can write down your choices and share them without paying in advance. Put your wishes in writing and give copies to family. Don't rely only on your will, which may not be read until after the funeral, or on a single copy in a safe deposit box that may be hard to open quickly.
A prepaid plan is usually not right for you if you might move, you want your family to have flexibility, you are not sure which funeral home you want, or you may need the money for other things. In those cases, final expense insurance or a payable-on-death account may fit better.
Questions to ask before you sign
- Exactly what goods and services are included, and which prices are guaranteed?
- Where does my money go: a trust, an insurance policy, or somewhere else? Can I see it in writing?
- What happens to the interest on money held in a trust?
- What happens if the funeral home closes or is sold?
- Can I transfer the plan if I move? What does it cost?
- Can I cancel? Will I get all of my money back?
- What happens to any money left over after the funeral?
Keep a copy of the contract with your important papers and give a copy to a family member. Your state insurance department or attorney general's office can tell you who regulates prepaid funeral plans where you live.
Common questions
How do I choose a prepaid funeral plan?
Look for a plan whose contract helps protect your money in a trust or insurance policy, lists exactly what is included and which prices are guaranteed, and lets you cancel or transfer it. Compare itemized price lists from two or three funeral homes, and check your state's rules before you pay.
Is a burial plan the same as burial insurance?
Not always. "Burial plan" can mean a prepaid funeral contract with a funeral home or a burial insurance policy. A prepaid plan pays the funeral home for a specific funeral. Burial insurance pays cash to your beneficiary, who can use it at any funeral home or for other costs.
What happens to my prepaid funeral if the funeral home goes out of business?
It depends on your state and how the plan was funded. Money held in a trust or insurance policy may be protected. The FTC advises asking whether you are protected if the firm goes out of business before you sign. Get the answer in writing.
Can I move my prepaid funeral plan to another state?
Some plans can be transferred, often for an added cost. Others cannot. The answer depends on the contract and on how the plan is funded, so check before you sign. The FTC notes that transfers often cost extra, so ask before you pay, especially if you may move closer to family later.
Does the Funeral Rule protect my prepaid money?
No. The Funeral Rule covers price lists and your right to choose goods and services. How prepaid money is protected is set by state law, and the FTC notes that protection varies widely between states. Ask your state insurance department or attorney general who regulates prepaid plans where you live.
Are prepaid burial policies a good idea?
They can be for someone who knows exactly what funeral they want, plans to stay in one area, and wants decisions made ahead of time. They are a poorer fit for people who may move or who want their family to have cash for other bills. Compare with burial insurance first.
How much is a funeral plan?
It depends on the funeral you choose and where you live. A plan costs about what the funeral home charges for those goods and services. For reference, the NFDA's 2023 national medians were $8,300 for a funeral with viewing and burial and $6,280 with viewing and cremation, not counting cemetery costs. Ask for itemized price lists. See funeral costs.
Can I cancel a prepaid funeral plan and get a refund?
It depends on your state and the contract. Revocable plans can often be cancelled, though some states and contracts allow fees. Irrevocable plans, often used for Medicaid planning, usually cannot be refunded. In New York, for example, revocable agreements can be withdrawn at any time with interest and no fees. Get the cancellation terms in writing before you pay.
Is the interest on a prepaid funeral account taxable?
Often, yes. Interest earned on money held for a prepaid funeral is generally taxable. In New York, for example, the interest is reported to you each year and you owe income tax on it. Some funeral trusts elect special IRS treatment as a qualified funeral trust. Ask the funeral home how its plan is taxed.
Sources
- FTC: The FTC Funeral Rule
- FTC: Planning your own funeral
- FTC: Funeral Industry Practices Rule (16 CFR Part 453)
- NAIC: Find your state insurance department
- New York State Department of Health: Before prepaying your funeral, know your rights
- NFDA: 2023 General Price List Study (national median funeral costs)
- IRS: About Form 1041-QFT, qualified funeral trusts