Paying for Your Prearranged Funeral

We recommend that you talk to your funeral director about the prefunding options available to you. In New Jersey, there are three ways to prepay or prefund a funeral.

Your first funding option is to open a prepaid funeral trust account. When you prepay for funeral arrangements, all monies are required to be placed in an account in your name, insured by the Federal Deposit Insurance Corporation (FDIC), and held in trust. This means the funeral home cannot access those funds while you are still living.

Revocable prepaid trust accounts are 100 percent refundable, transferable and adjustable. Irrevocable prepaid trust accounts are NON-REFUNDABLE and must be used for funeral and burial expenses.

For further information on the types of prepaid trust accounts, please see the section Prepaid Agreements.

Most New Jersey funeral directors use the New Jersey Prepaid Funeral Trust Fund (Funeral Planning CHOICES), which is a pooled trust offered through the New Jersey State Funeral Directors Association.

A pooled trust can obtain better interest rates for its individual account holders by commingling multiple accounts. With Funeral Planning CHOICES, your funds are commingled with thousands of other accounts in secure jumbo certificates of deposit to earn the highest possible rate of return. Accumulating interest on your principal deposit can help offset increases in funeral home prices.

When you are ready to preplan, we recommend contacting a funeral home that participates in Funeral Planning CHOICES.

Your second funding option is to use the proceeds from an existing insurance policy or policies. If prudent to do so, you 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, the funeral home can complete a revocable or irrevocable insurance assignment on the proceeds of the policy. In this case, the funeral home is named as the policy's owner. The policy's proceeds are then assigned to the funeral home to be used as payment for funeral costs at the time of death.

In the case of an irrevocable assignment, the State of New Jersey is named primary beneficiary on the policy, thus allowing any funds remaining after the funeral bill is paid to go to the state, as required by law. With revocable insurance assignments, any remaining monies after the funeral bill is paid will be returned to the primary beneficiary.

The third funding option is to pair a prepaid funeral agreement with a newly issued funeral insurance policy or annuity. When the death occurs, the insurance proceeds are paid directly to the funeral home and are used to offset all or part of the cost of the funeral.

In New Jersey, a funeral insurance policy can only be sold on behalf of a funeral home by a licensed funeral director who is also a licensed insurance producer. The product sold must be approved by the New Jersey Department of Banking and Insurance as a “newly issued funeral insurance policy.”

Like irrevocable trust accounts, irrevocable insurance policies and annuity contracts for SSI/Medicaid recipients are non-refundable.

Unlike a revocable trust where the monies are 100 percent refundable, insurance and annuity policies are not liquid. While it may be possible to surrender your policy, you might only receive an amount equal to the cash value of the policy less any penalties, taxes or money borrowed against it.

Before making a decision to purchase or surrender a funeral insurance policy, be sure to examine the policy details on coverage, costs and restrictions.

Funeral Planning CHOICES

Prefund your funeral with confidence.