PREARRANGED FUNERAL PLANS
Many individuals now plan their funerals and pay for them in advance in order to help their families avoid the difficulty of last-minute decisions and expensive costs. Prearranged funerals also enable people to shop around and carefully choose their own plans and arrangements. Many funeral homes and cemeteries in Iowa sell prearranged funeral purchase agreements.
“Purchase agreement”means an agreement to furnish cemetery merchandise, funeral merchandise, funeral services, or a combination thereof when performance or delivery may be more than one hundred twenty days following the initial payment on the account.
“Funeral merchandise”means personal property used for the final disposition of a dead human body, including but not limited to clothing, caskets, vaults, urns, and interment receptacles. It does not include easements for burial rights in a completed space or cemetery merchandise.
“Funeral services”means services provided for the final disposition of a dead human body, including but not limited to services necessarily or customarily provided for a funeral, or for the interment, entombment, or cremation of a dead human body, or any combination thereof. It does not include perpetual care or maintenance.
The funeral or cemetery establishment that sells the purchase agreement is required to secure the purchase by (1) placing the funds in trust at a financial institution; (2) purchasing insurance; (3) purchasing an annuity; (4) purchasing a surety bond; or (5) for sales of markers/memorials and polystyrene/polypropylene outer burial containers prior to 7/1/2007, placing merchandise in warehoused storage. These methods are not mutually exclusive and some sellers use more than one approach.
Types of Purchase Agreements
Guaranteed price: The seller guarantees to fulfill the purchase agreement for the amount paid plus accrued interest, with the exception of cash-advance items (such as clergy, singer). If there is an excess of funds, the surplus belongs to the funeral home and/or cemetery.
Nonguaranteed price: The cemetery merchandise, funeral merchandise, funeral services, or a combination thereof is provided at the current price of the items. If the amount p aid under the purchase agreement, plus accrued interest, exceeds the total cost at the time of the funeral, the excess is refunded to the estate. If the amount paid under the purchase agreement, including accrued interest, is insufficient at the time of the funeral, the estate or a relative must pay the additional balance due.
Irrevocable: Both parties are bound to fulfill the terms of the purchase agreement. Each can be forced to abide by its terms and in case of default by the purchaser, the seller is under no obligation, unless otherwise stated in the purchase agreement, to refund any money paid on the purchase agreement. Only by mutual consent can the obligations under the purchase agreement be changed.
Revocable: The purchaser may withdraw from the obligation. However, there are usually stipulated penalties for cancellation.
There are many variations on these four main categories of purchase agreements. Iowa law requires specific disclosures to be included in each purchase agreement. Among those, they should disclose the funding method and the seller’s cancellation policies.
TITLE XIX (MEDICAID)
Consumers need to be aware of certain considerations relating to Title XIX. Title XIX considers a revocable purchase agreement an asset or resource (income). Since this income can jeopardize Title XIX payments, most purchasers under Title XIX have an irrevocable purchase agreement. However, if at any time a refund should become appropriate, the purchaser will want to protect his/her Title XIX benefits. Therefore, the refund should be handled between funeral homes or cemeteries without the transference of funds to the purchaser. Any excess funds left after a nonguaranteed funeral has been provided for a Title XIX consumer must be returned to the Department of Human Services.
RIGHT TO CANCEL
The purchaser may cancel a signed purchase agreement at any time prior to midnight of the third business day after the date of the transaction. During those three days the consumer should review the purchase agreement again and, perhaps, have another family member or an attorney also review it.
Individuals may set up a financial account at a financial institution for the purpose of funding the future purchase of cemetery merchandise, funeral merchandise, funeral services, or a combination thereof without any related trust agreement or purchase agreement. These accounts, which do not name a funeral or cemetery establishment, are defined as burial accounts.
PREPLANNING ON YOUR OWN
You can prepare a written statement detailing your wishes without setting aside any money. Be sure a relative, funeral home, nursing home, lawyer, or executor has a copy. Do not put it in a safety deposit box because it is too hard to get to at the time that it is needed.
Sometimes problems arise between the consumer and the funeral home or cemetery. Any complaints involving prearranged funeral plans should be mailed to the Iowa Securities Bureau, 601 Locust St. – 4th Floor, Des Moines, Iowa 50309- 3738. The e-mail address is firstname.lastname@example.org.