The Risks of Prepaying Funerals: Why Caution Is Key in the U.S.

As funeral costs in the United States continue to rise, with the median price of a traditional funeral reaching $7,848 in 2021 (National Funeral Directors Association, 2021), many Americans consider prepaying funeral expenses to ease the burden on loved ones. Prepaid funeral plans, offered by funeral homes, allow individuals to lock in services at today’s prices, theoretically shielding families from inflation and emotional stress. However, financial experts and consumer advocates warn that prepaying comes with significant risks, often outweighing the benefits. As economic pressures mount in a nation grappling with declining financial stability, understanding these pitfalls—and exploring alternatives—is crucial for informed end-of-life planning.

One major reason to avoid prepaying is the lack of flexibility. Once funds are committed to a funeral home, they are typically tied to that provider, making it difficult to transfer plans if you relocate or change your preferences. “If you move to another state, your prepaid plan may not transfer, leaving your family to navigate complex logistics or lose funds,” says Joshua Slocum, executive director of the Funeral Consumers Alliance (FCA) (Slocum, 2023). This is particularly problematic given that 89% of U.S. funeral homes are locally owned, limiting national portability (AARP, 2021). Additionally, if a funeral home goes bankrupt—a real risk, as seen in the 1999 Loewen Group collapse affecting thousands of families—prepaid funds may be lost, with little recourse for recovery (PinnacleQuote, 2024).

Another concern is financial mismanagement. Prepaid funds are often held in trusts or insurance policies, but oversight varies by state, and some funeral homes have been found to misspend or embezzle these funds (Lincoln Heritage, 2019). Even when managed properly, irrevocable trusts—the type often used to shield assets from Medicaid—cannot be altered, and any leftover funds may revert to the state rather than heirs (Vision Retirement, 2025). Revocable trusts, while more flexible, are considered “countable” assets for Medicaid eligibility, potentially jeopardizing benefits (Funeral Consumers Alliance, n.d.).

The economic argument for prepaying is also weak. While locking in today’s prices sounds appealing, funds placed in a bank account or invested could earn interest, potentially outpacing funeral cost inflation. “Your money is safer in an FDIC-insured account than in a funeral home’s hands,” advises financial planner David DuFault (U.S. News, 2023). Moreover, prepaying ties up funds that could be needed for emergencies, a critical concern as economic hardship grows.

For Americans facing financial strain, alternatives to prepaying offer greater flexibility. A payable-on-death (POD) bank account allows funds to be set aside for funeral costs, bypassing probate and remaining accessible to the account holder during their lifetime (AARP, 2021). Final expense life insurance policies, regulated more stringently than funeral trusts, provide a lump sum to beneficiaries, offering portability and adaptability (Vision Retirement, 2025). For those prioritizing affordability, direct cremation or green burials cost significantly less, often under $2,000, and can be funded through savings or insurance (AARP, 2021).

As economic challenges intensify, careful planning is essential. Prepaying funerals may seem like a compassionate choice, but the risks of inflexibility, financial loss, and limited returns make it a questionable investment. By exploring alternatives, Americans can ensure their final wishes are honored without compromising financial security.

References

AARP. (2021). Smart ways to help you pay for the cost of a funeral. Retrieved from https://www.aarp.org

Funeral Consumers Alliance. (n.d.). Pre-planning & pre-paying. Retrieved from https://funerals.org

Lincoln Heritage. (2019). Complete guide to prepaid funerals: Plan, costs, pros & cons. Retrieved from https://www.lhlic.com

National Funeral Directors Association. (2021). General price list survey. Retrieved from https://www.nfda.org

PinnacleQuote. (2024). Prepaid funerals: Costs, benefits, and potential drawbacks explained (2025 guide). Retrieved from https://www.pinnaclequote.com

Slocum, J. (2023). Should you prepay your funeral? Funeral Consumers Alliance of the Finger Lakes. Retrieved from https://www.fingerlakesfunerals.org

U.S. News. (2023). How prepaid funerals work. Retrieved from https://money.usnews.com

Vision Retirement. (2025). Considering prepaid funeral plans? Read this first. Retrieved from https://www.visionretirement.com