Whatever arrangements you make, you have two main options for covering costs. You can:
If you don't do any of these things, and your estate doesn't have enough money to cover the costs, your survivors will have to pay for any final expenses.
If you want to pay in advance, either all at once or under a payment plan, be sure you're dealing with a reputable provider of goods and services and document your arrangements very clearly.
There are reasons to be cautious about paying upfront. Though there are a number of legal controls on how the funeral industry can handle and invest funds earmarked for future services, there have been many reported instances of mismanaged and stolen funds. A great many other abuses go unreported by family members too embarrassed or grief-stricken to complain.
In addition, when mortuaries go out of business, customers who have prepaid may be left without a refund and without recourse. Also, many individuals who move during their lifetimes discover that their prepayment funds are nonrefundable—or that there is a substantial financial penalty for withdrawing or transferring them. In addition, money paid now may not cover inflated costs of the future, meaning that survivors will be left to cover what's left.
A safe, simple, and flexible option is to set aside funds that your survivors can use to cover the costs of your final plans.
After making your plans and estimating the cost, you can tuck away that sum (perhaps adding a bit to cover inflation or unexpected expenses) in a money market or other accessible fund. Tell the bank or financial institution that you want to set up a payable-on-death account. You can designate a beneficiary—a good choice might be the executor of your will or successor trustee of your living trust—who can claim the money immediately upon your death. The beneficiary will have no legal obligation to use these funds for your final arrangements, so make sure that person understands what the funds are for and that you trust the beneficiary to do as you ask.
We ask you to write out your financial plans in a few sentences. You'll also want to make sure your survivors have immediate access to any of the documents they'll need to carry out your arrangements, such as a prepayment contract or bank account information.