Why Should I Plan Ahead?

Peace of Mind

The most important reason to pre-plan is that it relieves your loved ones of the burden of making difficult decisions at a time when they are under enormous emotional stress. Many who have undergone the emotional strain of arranging a funeral within hours of losing a loved one have made the choice to pre-plan their own funeral.

Decisions 

When someone dies, those left behind must make important decisions in a short period of time. First and foremost, a decision needs to be made on how to handle the deceased’s body. Whether to choose burial, cremation, or entombment is the initial decision, but what about the additional choices you will have to make? 

These decisions can seem daunting, to say the least—especially in the time of grief. But they do not have to be.

Where to Begin 

To prearrange a funeral for yourself or a family member, you must first meet with a licensed funeral director. She or he will talk with you about the kind of funeral you desire and ask you to make a number of decisions that otherwise would be discussed after death.

Through the course of the prearrangement, the funeral director will provide you with a General Price List (GPL) outlining all merchandise and services available to you at that funeral home. The choices you make will be recorded on an itemized statement (entitled a Statement of Funeral Goods and Services Selected). The statement will list all requested services, merchandise, and charges involved. Any advance payment you make toward your funeral will be held in trust as required by New Jersey law to ensure the money will be there when it is needed. 

If you intend to preplan your funeral, tell a family member or close friend about it. Give them the information on the funeral home you chose and that prearrangements were made. You may also want to consider asking someone to accompany you to the prearrangement conference. This person can help identify the person who will have the authority to sign off on the arrangement at the time of your funeral.

Guaranteed vs. Non-Guaranteed Pricing

Like other costs, the funeral home’s charges may change between the time of the prearrangement and the time the funeral takes place. Some funeral homes, but not many, guarantee the prices they quote for your prearrangement. 

In a guaranteed price agreement, the funeral home agrees to provide the goods and services you have selected for the amount in the prepaid funeral account at the time of the death, regardless of whether the retail value of those goods and services exceeds the amount in the account at the time of death. 

With a non-guaranteed agreement, there is no commitment made by the funeral home to accept the amount available in your prepaid funeral account at the time of death as full payment for the goods and services you selected as part of your prepaid agreement. At the time of death, the retail value of the goods and services selected will be calculated. If the value of your account is less than that of the goods and services selected, your family has the flexibility to either pay the difference and follow through with your original arrangements or to alter the arrangements according to need. 

Both types of plans have certain advantages, disadvantages, and limitations. Making prearrangements with an interest-bearing trust can help keep the available funds in line with inflation. Find out the current interest rate or yield for the plan you have selected, and check your account periodically to verify that it is keeping up with inflation. 

Most of all, make sure that you fully understand the terms, conditions, and investment strategies of whatever prefunding vehicle you choose.

Paying for Your Prearranged Funeral 

In New Jersey, there are three ways to prepay or prefund a funeral. 

1. Establish a prepaid funeral trust fund account. 
Your first funding option is to open a prepaid funeral trust account. You can open a revocable or irrevocable account. Trust money in revocable accounts is 100% refundable on demand by the purchaser, with interest. You may also change the funeral home and the selected funeral services or merchandise at any time without penalty. (Note: Irrevocable trust accounts for SSI/Medicaid and General Assistance recipients are non-refundable.) 

When choosing a funeral trust fund, keep the following in mind: 
• 100% of the principal and interest must accrue to the benefit of the trust fund (less a trustee's fee of a maximum of 1 percent). 
• All moneys provided to the trust must be deposited in an FDIC-insured bank account. 

Most New Jersey funeral directors use the New Jersey Prepaid Funeral Trust Fund™ (NJPFTF), which is a commingled trust offered through the New Jersey State Funeral Directors Association, Inc., to prearrange a funeral. However, there are other products available. 

2. Assign existing life insurance policy or policies to the funeral home. 
A funeral can be prepaid using the proceeds from an insurance policy. If prudent to do so, a person can cash out the value of the policy and place it in a funeral trust fund to cover the costs of a prearrangement. If cashing out the policy is not a prudent option for the individual, the funeral home can complete a revocable or irrevocable insurance assignment on the proceeds of the policy. To do this, the funeral home is named as the policy's owner. The policy's proceeds are then either revocably or irrevocably assigned to the funeral home to be used as payment for all funeral costs at the time of death. 

3. Purchase funeral insurance or an annuity. 
N.J.S.A. 17B:17-5.1(a) defines funeral insurance policies as insurance policies or annuity contracts that are intended to provide, and explicitly marketed for the purpose of providing funds to the provider at the time of the insured’s death in connection with a prepaid funeral agreement. 
The following legal guidelines apply to prearrangements funded through newly issued insurance or annuities: 
• Insurance and annuities specifically sold to fund a preplanned funeral arrangement in New Jersey may only be issued by a licensed funeral director who is also licensed to sell life insurance (not all funeral homes offer this option). 
• The insurance contract must have been approved by the New Jersey Department of Insurance to be used in conjunction with funeral preplanning. 
• The funeral director must disclose whether or not he or she will earn a commission from selling you this policy. 
• Upon death, the insurance proceeds are paid directly to the funeral home. The premium for this policy is the current cost of the funeral. 
• Unlike a trust where the money is 100% refundable, insurance and annuity policies are not liquid. However, you may surrender your policy at any time. You will be paid only an amount equal to the cash value of the policy less any indebtedness. 
• Irrevocable insurance policies and annuity contracts for SSI/Medicaid recipients are non-refundable. 
Ask your funeral director about the prefunding options available to you and your family. 

Irrevocable vs. Revocable 

There are two kinds of prepaid agreements: Revocable and Irrevocable. 

Revocable Agreements 

Trust money in revocable accounts is 100 percent revocable upon demand, including all principal and interest. With a revocable agreement, you may change the funeral home and the selected funeral services or merchandise at any time without penalty. 

Irrevocable Agreements 

In New Jersey, irrevocable agreements are required when creating a prepaid funeral account for SSI/Medicaid applicants and recipients. Irrevocable means that the trust fund money is NOT REFUNDABLE. Only individuals prepaying their funerals in order to qualify for SSI, Medicaid, or General Assistance may establish irrevocable arrangements, which must be used for funeral and burial purposes. Irrevocable prepaid funeral agreements cannot, by law, be cancelled or refunded (although consumers may change funeral homes). 

Irrevocable Agreements and Asset Recovery 

New Jersey has an Asset Recovery law in place. The legislation says that, once all funeral expenses have been paid, any money remaining in irrevocable trust accounts opened on or after February 27, 2000, or in newly issued insurance policies purchased on or after February 27, 2000, will be forwarded directly to the State of New Jersey. The law was put in place to help reimburse New Jersey for a small portion of the money it spends each year on the SSI/Medicaid program. 

Consumer Protections 

New Jersey has an extensive set of laws and regulations that govern the prepaid funeral market and provide consumers with the following protections: 
• Classifies the misappropriation of prepaid funeral funds as a criminal offense. 
• Restricts preneed sales, solicitation, and promotion to licensed funeral directors. 
• Prohibits telephone or visitation “cold” calling. 
• Sets minimum disclosure standards. 
• Requires the existence of a prearrangement prior to providing a financial instrument for prepaying the funeral. 
• Provides that all funeral arrangements connected to a prepaid funeral agreement can be modified by specific individuals. 
• Provides that moneys used to fund revocable prepaid funeral agreements are 100 percent refundable upon demand by the purchaser, including all principal and interest (this does not apply to irrevocable agreements). 
• Requires that, with revocable prepaid funeral agreements, funeral directors return any proceeds in excess of the current retail prices to the purchaser or legal representative of the estate, or beneficiary (in the case of insurance products). 
• Provides for an irrevocable prepaid funeral agreement to be counted as an excludable resource for the purposes of SSI/Medicaid and General Assistance eligibility. 
• Prohibits funeral directors or firms from knowingly permitting themselves to be made the beneficiary of an insurance policy in conjunction with a prepaid funeral agreement. 
• Prohibits the advertising and promotion of “discounts” that are not actual price reductions and which are based solely on an insurance policy’s premium rate table. 
• Prohibits the funding of prepaid funeral arrangements through retail installment contracts or credit life insurance and/or reverse mortgages. 
• Requires that all funeral insurance products used meet uniform standards established by the New Jersey Department of Insurance and are sold by a duly licensed funeral director and insurance producer. 

SSI/Medicaid and Prepaid Funeral Arrangements

Supplemental Security Income (SSI), Medicaid, and/or General Assistance programs in New Jersey permit individuals to set aside money in a prepaid funeral arrangement without the money being counted as a resource for program eligibility purposes. In addition, the money set aside for prearrangements is not subject to the “look-back” requirement usually associated with becoming SSI/Medicaid eligible. This is called the “Prepaid Funeral Resource Exclusion.” 

If you or a family member expects to become SSI/Medicaid eligible within the next six months, you are permitted to establish a prepaid funeral arrangement. Prefunding your funeral will not affect your eligibility for assistance and, in most cases, makes good financial sense. What this means is that you will be able to plan and pay for the funeral of your choice BEFORE assets are used up for medical care and/or BEFORE assets are reduced to SSI/Medicaid eligibility levels. 
Prearranging your funeral also allows you to arrange a funeral of your choice as long as: 
• The cost of the funeral is within reason. 
• The prepaid account is irrevocable, meaning the money cannot be refunded or used for any purpose other than funeral costs.

New Jersey Prepaid Funeral Trust Fund 

For more than 30 years, consumers and funeral directors have confidently trusted the New Jersey Prepaid Funeral Trust Fund™ (NJPFTF) as their vehicle of choice for a consistent, straightforward, and dependable way to prefund funerals. 

Operated by the New Jersey State Funeral Directors Association, Inc. (NJSFDA) and governed by a Board of Trustees, the trust fund was established by and for the members of the NJSFDA in 1981. The NJPFTF was created for the sole purpose of safekeeping consumers’ prepaid funeral monies with the premise that what is good for consumers is good for funeral homes. 

The NJPFTF financial highlights for the year ended December 31, 2016 are as follows: 
• 48,038 consumer accounts 
• Over 600 funeral homes participating in New Jersey 
• Net growth of $6 million, including interest, deposits, and withdrawals 
• Annualized net yield to each consumer account of 1.29% 
• Grown to $362.9 million in trusted accounts since its inception in 1981 

How It Works 
If the NJPFTF did not exist, most funeral directors would have to deposit prepayments into individual trust accounts and handle each account separately. By contrast, the NJPFTF provides a safe, well-managed trust earning competitive interest rates. Your funds are pooled with thousands of other accounts in jumbo certificates of deposit, and the interest earned over time can help offset the cost of inflation. Prepaying your funeral in full and not making any withdrawals should assist your funeral director in providing the services and merchandise you selected when needed. 

Administration 
On the day the NJPFTF receives your contract and check, your money is deposited into the trust fund and will begin accruing interest immediately. The Trustees only invest in FDIC-insured bank deposits. The interest earned on those deposits will vary according to the current market rates. 

Each year, the NJPFTF will send you a Grantor Trust Tax Information and Account Summary Statement detailing account activity, gross taxable interest, and fiduciary fees. Interest income is reportable if you are required to file an income tax return with the Internal Revenue Service. 

Account Transparency 
The New Jersey Prepaid Funeral Trust Fund™ provides consumers with 100 percent transparency through the provision of annual account statements and up-to-date account balance information. This information is available by phone Monday through Friday from 9:00 a.m. to 5:00 p.m. at 800.286.3628 or online 24 hours a day, 365 days a year. 

To check online balances, consumers can visit the Check CHOICES Balances and Tax Statements section or click the CHOICES logo on the home page. Simply log in using the CHOICES contract ID or account number and the last four digits of the Social Security number used to open the account. Online balance information is updated daily and reflects all deposits and interest earned.

Controlling Your Funeral

Funeral arrangements are a deeply personal choice. Pre-planning provides you with the time needed to make practical, detailed decisions that reflect your standards, lifestyle, taste, and budget. 

In New Jersey, you cannot preauthorize your own final disposition. You can prearrange and prepay for your funeral; you can acquire a cemetery plot or express where you would like your ashes to be scattered, but you cannot sign the final authorization for disposition yourself. 

New Jersey, as well as other states, has what is called the Right to Control Law (N.J.S.A. 45:27-22). The law, absent what is called a “funeral agent designation” in a Will, outlines a next-of-kin hierarchy depicting who has the right to control the funeral and disposition of a deceased person. The person with the right to control is not necessarily the executor of the Will. 

Unless a court of competent jurisdiction has given other directions, the right-to-control hierarchy is as follows: 
• Funeral Agent or designee on an active duty service member's DD Form 93* 
• Legal spouse, NJ registered domestic or civil union partner** 
• Majority of surviving children over the age of 18 
• Surviving parent(s) of decedent 
• Majority of surviving siblings over the age of 18 
• Other relatives according to the degree of relationship 
• If there are no known living relatives as outlined above, the funeral director may accept the written authorization of other interested parties (i.e., friend, neighbor, colleague) 

* In the case of an active duty service member who died while on active duty in any branch or component of the United States Armed Forces, including the New Jersey National Guard called to federal active duty, the person designated by the decedent as authorized to direct disposition, as listed on the decedent’s United States Department of Defense Record of Emergency Data, DD Form 93, or its successor form, shall be the person appointed to control the funeral and disposition of the remains of the decedent. 

** New Jersey’s Civil Union Law took effect on February 19, 2007. The law mandates that civil union couples must receive the same benefits and protections and be subject to the same responsibilities as spouses in a marriage, whether they derive from statute, administrative or court rule, public policy, common law, or any other source of law. Therefore, the New Jersey Civil Union Law extends the right to control disposition to civil union partners in exactly the same way as it extends this right to spouses.

Executor, Power of Attorney, Guardians and Funeral Agent

New Jersey law grants legal guardians and those with power of attorney (called attorneys-in-fact) a variety of rights and privileges that relate mainly to the management of another person’s legal and financial affairs. The ability to preplan and prepay a funeral usually falls within these two categories. The ability to make funeral arrangements for the same individual following their death does not. 

Learn the differences between these four legal ways to control the affairs of another person. 

Power of Attorney (Attorney-in-Fact) 

People holding a power of attorney (POA) for a relative or friend at the time of death often believe that they have the right to make funeral arrangements for the person after they die. This is not the case. 

The POA is not a person. It is a legal document in which one individual (“the principal”) authorizes another individual (“the attorney-in-fact”) to act on their behalf in legal and financial matters. Under the terms of most financial POA documents, a designated attorney-in-fact can prearrange and prepay the principal’s funeral, but they cannot make at-need arrangements. The reason is that the POA document becomes null and void upon the principal’s death. 

The attorney-in-fact also cannot make funeral arrangements for another person on the principal’s behalf unless he or she is also an individual, such as a spouse or child, with a relationship to the deceased as outlined in the right to control law (N.J.S.A. 45:27-22).

Executor 

Sometimes individuals are led to believe that an executor of a Will or Estate has the right to control final disposition. This is not true. Being designated an executor means that the individual can control a decedent’s assets, not the final disposition. As a matter of fact, laws governing funeral homes and cemeteries assign only one role to the executor when it comes to disposition—to inform the funeral agent of their appointment in a decedent’s Will, if one in fact had been designated. 

The role of an executor is limited to financial matters such as probating the Will, locating the deceased’s property, opening an estate checking account, paying bills (including the funeral bill), filing appropriate tax forms, and the like. 

The job of the executor ends after meeting all the obligations of the estate and disbursing any remaining inheritances to the next-of-kin and/or other named persons or groups.

Guardians 

A guardian may or may not have the right to control final disposition, depending on the powers vested by a probate court. This needs to be determined on a case-by-case basis. 

Guardianship is a legal relationship wherein a probate court appoints someone (“the guardian”) to make personal and/or financial decisions for another person (“the ward”). Courts typically appoint the ward’s spouse or an adult child to this position, but can appoint anyone they believe will act in the individual’s best interests. 

In some cases, the New Jersey Office of the Public Guardian assumes control of a person’s personal and financial affairs. Upon the death of a state ward, the Public Guardian usually defers to the next-of-kin to make funeral arrangements. If there is no next-of-kin or the next-of-kin refuses to make funeral arrangements, the Public Guardian will assume that responsibility, albeit somewhat reluctantly.

Funeral Agent 

Often, individuals find themselves in situations where they have either outlived all of their relatives, are estranged from living family members, or are sure that those relatives remaining will not abide by their final wishes. Since these individuals are not able to authorize their own cremation or ground burial, what are they able to do? 
In New Jersey, individuals have the right to appoint a funeral agent. Once named, these “agents” have the supreme right to arrange for the disposition of an individual’s remains. The funeral agent’s right to control supersedes the rights of all others, including spouses, civil union and domestic partners, children, parents, and siblings. (Those traditionally within the right to control hierarchy.) 
The executor is not automatically the funeral agent. 

Appointing a Funeral Agent 

The funeral agent option is the legal way for you to appoint a specific person to arrange your funeral. Again, the executor is not automatically the funeral agent. 
To appoint a valid funeral agent, it must be done in a Will or Codicil. Appointments made any other way are not acceptable. Those interested in appointing a funeral agent need to visit an attorney and inform them that they wish to designate an individual as a funeral agent according to N.J.S.A. 45:27-22. 
The attorney will either draw up a Will or amend the existing Will to include language similar to this: 

Appointment of Funeral and Disposition Representative 

"I hereby nominate, constitute, and appoint [insert name] to serve as my Funeral and Disposition Representative, pursuant to N.J.S.A. 45:27-22. My Representative shall have the authority and power to control the arrangements for my funeral and the disposition of my remains. My Executor shall notify my Representative of this appointment, and shall advise my Representative of the financial means available to carry out the Funeral and Disposition arrangements. In the event [insert name] should predecease me or for some other reason not qualify to serve as my Funeral and Disposition Representative, then I nominate, constitute and appoint [insert name of alternate] as my Funeral and Disposition Representative.” 

Who can be a funeral agent? 

Executors of estates, friends, clergy members, social workers, specific relatives, or others can be named as funeral agents. Funeral directors should NEVER be named funeral agents. If a funeral director is unknowingly designated as a funeral agent, they should waive their rights in writing and pass them on to another individual. 
If you were designated a funeral agent, you are in charge of making the funeral arrangements using money set aside for this purpose in the Will of the deceased. Following death but prior to probate, the executor of the Will must inform you of your appointment as funeral agent and let you know how much money is available for funeral expenses. 

If you do not want this responsibility, you may appoint someone else to arrange the funeral on your behalf, or you may waive your right entirely. If you waive your right, the control of the funeral passes to other individuals in the order outlined in the right to control hierarchy. 

Who needs a funeral agent? 

Individuals who might consider designating a funeral agent include persons: 
• Who think their relatives will not honor their funeral wishes or prearrangements. 
• Who are estranged from relatives. 
• Who do not know where the living relatives are located. 
• Who do not have any relatives living.

The content on this page was adapted from the New Jersey State Funeral Director's Association website www.njsfda.org.