The American Way of Death Revisited (42 page)

This situation in Louisiana may serve as an example of problems elsewhere. Lee Norrgard, consumer affairs analyst for AARP, has been monitoring the problems of prepaid funerals. In
Final Choices: Making End-of-Life Decisions
(ABC-CLIO, 1992) he writes: “Is there adequate consumer protection for buyers of preneed plans? At this point, the answer is no. Regulations, investigations, and auditing are minimal in most states. In at least one instance, some of the worst abuses surfaced as a result of private legal actions rather than state enforcement activities.… Buyer beware!”

The
Consumers Digest
article reports that “about $50 million in preneed funds was stolen or reported missing nationwide.” As of 1997 only seven states had some sort of guarantee fund to protect consumers against such default: Florida, Indiana, Iowa, Missouri, Oregon, Vermont, and West Virginia.

Anyone who has paid for a funeral—or is thinking about it—should ask, “Where is the money invested and is it safe?” There are several ways to handle funeral financing in advance, some safer than others.

When you make out a check to the mortuary to pay for a pre-need funeral, there is
no
guarantee that the money will find its way to safekeeping. One funeral director complained that he hadn’t had a funeral in thirteen weeks and was worried about how to meet business obligations. When “Mildred” prepaid for her funeral, he used the money for his mortgage payments, despite the fact that the state required that 100 percent of the funds be placed in a federally insured institution. It’s likely that he had every intention of taking care of Mildred when she died, but when the state finally put him out of business for other misdeeds, officials discovered that $150,000 in prepaid funeral money—including Mildred’s—had vanished.

Few states require that all prepayments be placed in trust. Fewer still do any auditing. This is particularly true of cemetery prepayment and perpetual-care funds. The cemetery owners generally have unrestricted access, which accounts for the scandalously high incidence of misappropriation of endowment care funds. Without conscientious auditing, there can be no assurance that prepaid funds are safe. California, which is one of the few states that require 100 percent trusting of funeral prepayments, also leads the nation in the incidence and the magnitude of the thievery.

Perhaps most at risk are those in small towns—where everyone knows everyone—who place great trust in the local funeral director. In 1977, after receiving an estimate of $587 for the simple funeral she wanted, Annie Patterson sent a note to the man she thought of as “her” funeral director:

Annie told her children that “it was all taken care of,” and—because she was a meticulous and responsible person—no one doubted her.

When Annie died almost twenty years later, “her” funeral director had already passed away. A son had taken over the business, but Annie’s family felt comfortable calling the small-town funeral home
she had trusted for her final care. The first sign of trouble came when they were told, “You know it will be more than $587, don’t you?” When a final funeral bill was presented for $3,695, there was no mention of the $587 that had been prepaid, let alone any interest that might have accumulated. The family was shocked. A simple cremation and graveside service was all they had arranged. A scramble through Annie’s shoe box of important papers turned up no receipts. Annie had never used checks; she always paid in cash.

Insurance policies generate a relatively low rate of appreciation. The seller gets a commission, and the insurance company pays itself to invest the funds. “Insurance-funded preneed arrangements are the fastest growing preneed product on the market,” says Lee Norrgard. A number of funeral-related companies are getting into the funeral insurance business. “Forethought”—which is sold through funeral homes—is managed by the Batesville Casket Company and guarantees to “freeze” the wholesale price of the casket to your funeral home. But the low rate of growth on the policy—estimated at 3.63 percent—doesn’t match overall funeral inflation. “I can handle that,” said one undertaker, “because my prices are where they should be” (high, one would find) “and I don’t mind guaranteeing the funeral price.” Unless the funeral home chooses to make such a commitment, survivors may be hit with additional costs.

Master trusts set up by morticians’ associations exist in thirty-two states. Only some of your prepaid funeral money may end up in the trust, depending on state law. Colorado, for example, requires a deposit of only 75 percent, allowing the funeral director or other sales agent to pocket a 25 percent commission. State associations that promote these trusts are paid a quarterly fee based on total investment—a strong motivation to push them. Commingled funds can be invested at a high rate of return which allows your account to grow at more than 5 percent on average while still covering the various fees. Some contracts use this growth to guarantee funeral goods and services; some do not. A few states permit a funeral home to withdraw an annual administrative fee, but most mortuaries leave it in the trust to grow, according to Nancy Gorchoff at the Access Financial Group, which manages such accounts for several states. The trust fund group takes care of reporting the interest. How much you get back if you were to cancel your arrangements would vary
from state to state. Even the states that require 100 percent trusting permit the undertaker to claim an administrative fee.

A pay-on-death trust account at your local bank will give you the most control and flexibility. Sometimes called a “Totten Trust,” it can be moved easily if you do; it’s as safe as the bank it’s in. Pennsylvania attorney David Morrison, who specializes in elder law, recommends that you name yourself, or a close friend or next of kin—not the mortuary—as the beneficiary.

Whether you choose an irrevocable funeral plan or not will depend on whether you need to shelter assets prior to applying for SSI or Medicaid. Morticians are always eager to sell an irrevocable funeral contract, especially if you have arranged for a rather elaborate exit. Most people think that when it’s “irrevocable,” the body is all but in the hearse, and some funeral directors may use the “irrevocable” ploy to keep the arrangements fixed.

When her father died at a very old age, P.F. decided to opt for an immediate cremation rather than the funeral with viewing for which he had already paid. All her father’s friends had died, and the few scattered relatives would not be able to attend. When the funeral home refused to honor her request to change the plans, she walked out, then transferred the body—and the funeral funds—to another mortuary.

Mrs. S., after hearing a social worker at the senior center advise about protecting funeral money before ending up in a nursing home, promptly visited the local funeral director to make arrangements. She wanted to be embalmed before she was cremated, she said—just to make sure she was dead. The funeral director started adding various other charges to the list on his yellow legal pad (urn, urn vault, tent at the cemetery) until the total was over $3,200. Mrs. S., eager to protect her children from any worry or expense, wrote a check on the spot, made out to the local bank where her trust account would be held. But after a few weeks, she was troubled. She had selected cremation because she wanted to keep the cost down. A bill of $3,200 seemed like too much, so she wrote to the state Funeral Board. There was nothing the board could do, she was told—her plan was “irrevocable.” Only after the intervention of the local memorial society—which pointed out numerous FTC violations in the transaction—and
the help of an interested employee in the Department of Banking and Insurance did the funeral home agree to refund her money.

Irrevocable plans can almost always be transferred from one funeral home to another, but few morticians will offer this information. When Mrs. H. moved in, the nursing home insisted that funeral arrangements be made without delay. Her daughter—without any consultation—arranged for a $4,000-plus funeral at the only funeral home in town, written up in an irrevocable funeral contract and paid for from Mrs. H.’s own checking account. It had been difficult for Mrs. H. to manage her affairs—arthritis had taken away her sense of independence and control, and she’d depended on her daughter to write her checks, among other things. But she knew that the $4,000 funeral was not to her liking. With the help of a Senior Law Project attorney, she was able to transfer her “irrevocable” funeral plan to another funeral home. After writing up an irrevocable agreement for a $695 cremation, the new funeral director instructed the bank to refund the difference.

In short, an “irrevocable” trust does not require you to give up all rights to control your investment. If a funeral director attempts to take undue advantage of your situation, you may have legal recourse.

In most cases, shielding assets in order to qualify for government benefits is the only sound reason for paying for a funeral in advance. The only way to do that is with an irrevocable trust. But keep in mind that even though your trust account is irrevocable, you will be responsible for declaring the interest income because it will ultimately be used for your benefit. Mrs. M., in South Carolina, was irate: “The funeral home sent me a statement showing how much interest I’m supposed to declare on my income tax return. I don’t have that money anymore, and when I die the funeral home will get it all. Why should I have to pay taxes?”

A
t the June 1996 Nashville gathering of nonprofit funeral and memorial societies, Lisa Carlson—the executive director of the Funeral and Memorial Societies of America (FAMSA)—issued a call for social activism:

The following year—with the cooperation of other consumer groups including AARP and the Consumer Federation of America—FAMSA petitioned the FTC to reopen the Funeral Rule for new amendments. Key objectives will be: to outlaw the nondeclinable fee, to legitimize private viewing of unembalmed bodies, to specify costs in connection with body donation, and to bring cemeteries under the coverage of the Funeral Rule. The situation will demand close attention from consumers, given the predictable response from the industry—which is happy, indeed, with the rule as it stands.

Who are these meddlesome do-gooders willing to take on a well-heeled and powerful industry? “Unitarians, Quakers, eggheads, and old farts who are nothing more than a middleman for the industry
and a cheap funeral,” was one glib characterization. Carlson cheerfully acknowledged that she qualifies for “at least three of those four.”

The practice of group planning for funeral arrangements started early in the century in the Farm Grange organization in the Northwestern United States. From there the idea spread to the cities, mainly under church leadership. The People’s Memorial Association of Seattle, organized in 1939 by a Unitarian minister, was the first urban group. Organizations spread gradually along the coast, then eastward across the United States, and again northward into Canada. Vancouver boasts the largest such society today, with over 100,000 members.

By 1963 the societies had become a continent-wide movement, and the Cooperative League of the USA called a meeting in Chicago, where Canadian and American societies together formed the Continental Association of Funeral and Memorial Societies. Canadian societies later dropped out, and the name was changed to the “Funeral and Memorial Societies of America” in 1996.

Funeral planning and memorial societies generated public pressure that resulted in the 1984 Funeral Rule. But once members were convinced that consumers had what they needed, social activism waned. Only a few of the societies continued to conduct annual price surveys of area mortuaries. Many had negotiated discounts for members with cooperating establishments; as a cooperative buyer’s club they had been very successful, and their memberships grew without fanfare. Smaller societies, staffed by volunteers, were still struggling; others went out of existence altogether.

John Blake, who lived in Egg Harbor, Wisconsin, knew nothing about memorial societies in 1986. That year, when his mother died in Bremerton, Washington, Blake flew out to arrange for her cremation. “The funeral director was going to burn a $150 box,” Blake said. “My mother won’t get into that,” he told the funeral director with a chuckle. “She was a very frugal woman.” So Blake and his son-in-law and two grandchildren built “a nice little box” with $20 worth of lumber. Only after her death did they discover that she had been a member of the People’s Memorial Association. Had they known, the cost would have been even less.

Blake soon became involved in the Wisconsin societies. But the personal satisfaction of family participation remained a strong force in his life. When Lisa Carlson’s
Caring for Your Own Dead
was published
the next year, he felt that disseminating it through the societies was a matter of importance. It was on his urging that Carlson became involved in the society movement.

A new option had become available—handling all funeral arrangements without an undertaker, as had been the custom a century ago. The first edition of
Caring for Your Own Dead
sold 10,000 copies.

Karen Leonard—seduced into casket sales for the “fun” of it—soon found herself the director of the Redwood Funeral Society in Northern California. Taking a page from the funeral industry’s own indispensable Grief Therapy mantra, she perceived the therapeutic benefits of caring for one’s own dead. Jerri Lyons and others, with Leonard’s support, started the Natural Death Care Project in 1996. They assisted families in handling nearly fifty deaths the very first year. Members from their group expect to establish similar projects in other states.