Are Prepaid Funeral Plans Worth It? Pros, Cons and 7 Checks (US)

A prepaid funeral plan is worth it for some people and a poor deal for others. It can lock in today's price for the goods and services you choose, and keep money set aside for your funeral. It can also protect your eligibility for Medicaid, if you use an irrevocable contract. But your money is tied up with one business, protections differ by state, and some contracts cannot be cancelled. "Protections vary widely from state to state, and some state laws offer little or no effective protection," the Federal Trade Commission warns (FTC).

This page helps you decide. It explains how prepaid plans work, who they suit and who they do not, and seven checks to make before you hand over any money. It is general information, not financial or legal advice. Facts were checked on 2 November 2026.

How does a prepaid funeral plan work?

You meet a funeral home, or sometimes a cemetery or seller. You choose the goods and services you want. You agree a price. Then you pay, in one sum or in instalments. When you die, the funeral home provides what you chose.

The money has to be kept safe until then. US states use two main methods, the FTC explains. Some require the seller to put a percentage of your payment in a state-regulated trust. Others allow it to buy a life insurance policy, with the death benefit assigned to the funeral home (FTC).

Trust-funded plans

Your money goes into a trust or bank account. In New York, for example, the funeral director must deposit it within 10 days in an interest-bearing account or a government-backed investment. They must tell you where it is within 30 days (NY Department of Health).

Interest matters. It is what keeps a fixed price affordable over many years. Ask who gets the interest, and who pays tax on it. In New York, you do, because "it is still your money."

Insurance-funded plans

Your money buys a life insurance policy. When you die, the policy pays the funeral home. Ask who the insurer is, and who is named as the beneficiary. Then check the insurer with your state insurance department.

Guaranteed or non-guaranteed?

This is the most important word in the contract.

• Guaranteed: the funeral home accepts the money in your account as full payment, even if prices rise. Your estate pays nothing more for the guaranteed items.
• Non-guaranteed: the money goes toward the price at the time of the funeral. If prices have risen, your estate pays the difference. If there is money left, it goes back to your estate.

Even a guaranteed plan usually leaves out some costs. New York lists cemetery costs, clergy fees and death certificate fees as common examples (NY Department of Health).

What are the pros and cons?

Pros	Cons
Can fix today's price for guaranteed items	Your money is tied up, often for decades
Your family does not have to choose under pressure	Protections depend on your state, and some are weak
Money is set aside and cannot be spent by accident	Some contracts cannot be cancelled or refunded
An irrevocable contract may help with Medicaid planning	Moving away can cost extra, or the plan may not transfer
One phone call for your family when the time comes	If the business fails or is sold, problems can follow

The worst case is real. National Prearranged Services sold more than 97,000 prepaid funerals and then drained the money meant to pay for them. We tell that story in the $450 million pre-need fraud. It is rare, but it is why the checks below matter.

Who might a prepaid plan suit?

• People applying for Medicaid, or likely to need it for long-term care. An irrevocable plan can set money aside for the funeral.
• People with no family nearby to arrange things.
• People who are sure of their wishes and will stay in the same area.

Who might do better without one?

• People who may move to another state.
• People who would want the money back if their plans change.
• People whose state offers weak protection for prepaid money.

Remember: you can plan without paying. The FTC says you "may wish to make decisions about your arrangements in advance, but not pay for them in advance" (FTC). You keep your money and still spare your family the guessing.

How do prepaid funerals affect Medicaid?

Medicaid has limits on how much you can own. Money in an irrevocable prepaid funeral contract is generally not counted, because you can never get it back. Each state sets its own rules, so this section uses examples.

New York's rules, as an example

New York's Department of Health explains it plainly (NY Department of Health).

• You must use an irrevocable agreement if you are applying for Medicaid.
• The money paid into it "may not be refunded under any circumstances."
• You can still move it to a different funeral home. The money must be transferred within 10 days of your written request.
• Money left over after the funeral goes to the county, not to your family.

The federal SSI rules

Medicaid rules in many states follow the federal Supplemental Security Income (SSI) rules on what counts. Under SSI, these do not count toward the resource limit (SSA, 2026):

• burial plots or spaces for you or your immediate family;
• burial funds of up to $1,500 each for you and your spouse;
• life insurance policies with a combined face value of $1,500 or less.

The SSI resource limit is $2,000 for one person and $3,000 for a couple in 2026.

These rules are complex, and they interact. Before you sign anything for Medicaid reasons, ask your state Medicaid office or an elder law attorney.

What are the 7 checks before you prepay?

The FTC lists the key questions to ask (FTC). Here they are as a checklist, with what to look for.

1. What am I paying for? Merchandise only, like a casket and vault? Or funeral services too? Get a written, itemised statement. Under the FTC Funeral Rule, you can buy only the items you want (FTC).
2. Where does my money go? A trust or an insurance policy? Who is the trustee or insurer? Ask for written proof of the deposit.
3. Is it guaranteed? Which items are guaranteed, and which are not? What will my family still pay?
4. Can I cancel? Is the contract revocable or irrevocable? What would I get back, and when?
5. What if the business closes or is sold? In New York, both homes must tell you within 30 days of a sale, and you can ask for your money back with interest. Ask what your state requires.
6. What if I move, or die away from home? "Some prepaid funeral plans can be transferred, but often at an added cost," the FTC says.
7. Who is the regulator? Find your state's funeral board, insurance department or banking department. In Texas, for example, prepaid funeral contract sellers are licensed by the Texas Department of Banking (Texas DOB). Ask whether the seller is licensed and whether there are complaints.

For more questions drawn from the NPS fraud, see the checklist at the end of our NPS case study.

What about burial insurance or final expense insurance?

Burial insurance, also called final expense insurance, is a small whole life insurance policy. Its purpose is to pay for the funeral and other end-of-life bills. One 2026 price study describes typical policies as $5,000 to $25,000 of cover (Asurgo).

Here is how it differs from a prepaid contract.

	Prepaid funeral contract	Burial or final expense insurance
Who gets the money	A funeral home	The person you name
What it can be spent on	The goods and services in the contract	Anything
Does it fix the funeral price?	Yes, if guaranteed	No
Can you move?	Sometimes, at a cost	Yes, it follows you
Ongoing cost	One payment or instalments	Monthly premiums, often for life

Ask any insurer how much you will pay in total over your expected lifetime, and compare that with the cover. Some policies pay only part of the benefit if you die in the first years. Check your state insurance department before you buy.

How much should you set aside?

It depends on your choices. For a guide, the NFDA's latest US medians are $8,300 for a funeral with viewing and burial and $6,280 with cremation, before cemetery costs (NFDA). A direct cremation had a median of $1,995 on 919 price lists in 2026 (Asurgo).

Our free funeral cost estimator gives a low, typical and high figure for your choices. Our line-by-line funeral cost guide explains where the money goes.

What should you do first?

Write your wishes before you talk to any seller. Burial or cremation? A service or not? A rough budget? Then you choose the plan that fits your wishes, not the one a salesperson suggests.

Next, tell your family. "If family members don't know that you've prepaid the funeral costs, they could end up paying for the same arrangements," the FTC warns (FTC). Keep the contract where they will find it, not only in a safe deposit box.

Want one place to keep it all? The Library's Funeral & Memorial Planning worksheet has space for your choices and where your plan papers are. It also has a cost table for comparing quotes. Our guide on how to plan your own funeral walks through the steps, and 25 questions to ask a funeral home helps when you meet them.