The idea of a prepaid funeral is appealing to many people because they think that this will take the stress off their loved ones. This does seem like it would the best thing to do, but issues with prepaid funeral are more common than what you might realize. It is important that you consider this option carefully and learn about the alternatives that you have to helping your loved ones.
The money for a prepaid funeral should be protected and used only for your services; however, this isn't how it might play out. There are many cases in which the funeral home misapplies the funds or when they aren't documented at all. Unfortunately, this could throw your loved ones into a legal battle when they should be able to focus on healing after your death.
Sometimes, family members don't even report the issue with prepaid funerals because they can't stand the thought of having to deal with the battle that will follow. In these cases, they will have to pay for the funeral out of their own pockets and your money will be wasted.
One option that you can use instead of a prepaid funeral plan is to set up a trust just for your funeral expenses. Most commonly, these are done using a Totten Trust. The benefits of these are considerable. It is unlikely that the money will come up missing. Plus, if you move, want to change the funeral home where your services will be held, or if the funeral home you chose closes, your family can use the money to hold your funeral in a new location since the money isn't tied to a specific funeral home.
Source: FindLaw, "Funeral Payments: Prepayment Horrors," accessed May 18, 2018