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Weighing benefits of pre-need paying
Tuesday, May 25, 1999 Pittsburgh Post-Gazette
Just settled into a new apartment in the Vanadium Woods retirement village in Scott, 79-year-old Fred Peelor figures he's got at least another decade of good living ahead of him.
But if the unexpected happens, he's prepared, and so is his wife, Madeline.
The Peelors visited Beinhauers Mortuary in Peters last year to select their caskets, plan their visitation ceremonies and hand over a check for $12,000 to cover all of the funeral costs -- whenever they may arise. Then they visited the Queen of Heaven cemetery of the Pittsburgh Catholic Diocese and picked out a mausoleum unit they'll share, for an additional $6,000.
The Peelors' seven children will have fewer pressing decisions to make than many families at the time their parents die.
"I like to do stuff myself," said Peelor, a retired manager from U.S. Steel Corp. "We got exactly what we wanted, the way we wanted it. You should never wait till the last minute about anything."
The couple are among a growing number of Americans who have prearranged the details that will follow their demise, and a smaller subset of that group who already have taken care of the payments -- through insurance, trusts or other designated bank accounts supposed to serve as a hedge against inflation.
Although cemetery operators and an increasing number of funeral directors work hard to market the "pre-need" side of their industry, they and financial planners note it doesn't necessarily make sense for everyone to pay for caskets, plots, monuments and services in advance.
Advising loved ones of your wishes after death would benefit virtually anyone, they say, but actually setting money aside for it is a practical step primarily for people in or approaching retirement who have addressed most other financial obligations. It's considered most useful for those elderly facing the possibility of going on nursing home Medicaid assistance, since they can shelter a portion of their assets in an irrevocable funeral trust.
"Baby boomers still have families to educate, homes to pay for, cars to pay for, decent life insurance policies. The chances of them coming in to make pre-arrangements are pretty slim," said Kevin Dieterle, supervising funeral director at Readshaw Funeral Home Inc. in Carrick, where people in their 70s are the primary ones signing advance contracts.
Cemeteries have always taken the lead in pre-need marketing. Memorial parks that aggressively pursue such sales say as much as 90 percent of their burials are people who have worked out the details in advance. Area funeral directors say their own percentage of deaths involving people with pre-need contracts is more commonly 10 to 20 percent.
"Most people probably buy between the ages of 50 and 60, after the kids are grown and mostly through college," said Dave Regina, president of Forest Lawn Gardens in McMurray. "Ninety-five percent of [the customers] probably weren't happy when they were doing it, but probably 100 percent were happy about it when the death occurred."
Even so, consumer advocates and people within the death care industry itself say people need to be as cautious about this burgeoning type of transaction as any other in which they're investing thousands of dollars.
"We don't recommend pre-paying," said Adrienne Oleck, consumer protection attorney for the American Association of Retired Persons. "It means people are tying their money up, even though they're living longer and longer, and may have a need for that large chunk of money for emergencies while they're living."
While problems occur in only a small fraction of pre-need transactions, Oleck and others say there is insufficient regulation in Pennsylvania or any other state to protect the consumer's money.
In one recent State Board of Funeral Directors case in which disciplinary action is pending against a Williamsport funeral director, he took more than $80,000 from families on a pre-need basis and converted it to his own accounts and uses instead of following requirements that the money be placed in trust in a banking institution.
While he was eventually caught, there's little auditing or enforcement of the money taken in advance by either funeral homes or cemeteries to make sure it's there for the consumers later, said Pennsylvania Funeral Directors Association President James D. Hahn, who has signed about 300 future customers to contracts worth about $1.5 million.
"I think there's going to be people burned in the next few years," he said of Pennsylvania's pre-need industry. "When consumers are hurt, the state is going to come in and start regulating better."
Consumer and industry representatives say there are certain things to be careful about in signing a trust or insurance contract regarding death plans, among them:
Advance payments supposedly are safer in Pennsylvania when turned over to a funeral director rather than cemetery, because the state requires that funeral directors put 100 percent of the money in trust rather than a 70 percent requirement for cemeteries. But as the Williamsport case shows, lax enforcement that relies on the seller's self-policing can render such requirements meaningless.
In any case, few people should believe they'll gain anything financially by putting money into their death arrangements.
"Pre-planning is not an investment -- it's a way to guarantee your funeral," said Mark Donato, who specializes in marketing pre-need plans for area funeral homes. "If you want to invest money, these are not the vehicles you use. ... This is more for peace of mind."
And that, at least, is worth a lot to Fred Peelor.
"It's nice to know the job is done," he said. "Hey, death is inevitable, it's gonna happen. I want it done my way."
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Be sure exactly where money is being invested, who is overseeing it in addition to the cemetery or funeral director, and what value you're getting in terms of the cost of future products or services in relation to the rate of inflation.