MSFS 351 - Pre-need Quiz

pre-need

funeral arrangements made in advandce of need

Early Europeans

Beginning of pre-needs, Roman 'collegium' and middle age 'burial clubs/guilds', 'burial bonds/associations'

Civil War

What era did pre-need start in the US?

$100

flyers were posted to send loved ones home for ____ in advance during the Civil War

They provide security for future business

what do pre-needs mean to the growth in funeral service?

Prefunded arrangements

arrangements in advance of need with provisions for funding or prepayment

prelanned arrangements

arrangements made in advance of need that do not include provisions for funding or prepayment "info only"

Reasons to preplan/fund

make wishes known, less emotional and more intelligent decisions, NOK relieved of financial burden, merchandise secured, record statistical info, legally binding, reduction of assets for Medicaid

medicaid spend down

process that allows individuals to qualify for Medicaid by reducing excess income/assets.

How does medicaid spend down work?

convert cash, bank accounts and investments into 'exempt assets'

Irrevocable Prepaid Funeral (trust and insurance)

example of an exempt asset

revocable contract

contract may be terminated by the purchaser any time prior to the death with a refund of the monies paid

irrevocable contract

contract cannot be terminated or cancelled can only be used to fund the funeral

state

where do leftover funds go at the time of a funeral with an exempt asset

guaranteed contract

funeral home guarantees that the services

and merchandise will be provided at the time of need for an amount not exceeding the original amount of the contract plus any interest regardless of the cost of providing the services and merchandise at time of death

non-guaranteed contract

funeral home only agrees that the amount prepaid plus any interest will be credited to the balance due. However, the price of the funeral will be whatever the current price is for the services and merchandise at the time death occur

trusts and life insurance

types of prefunded contracts

service/merchandise have not been provided

why can the FH not take money and put it directly into their account

follow FTC and stored for availability at death

requirements of prefunded FH contracts

insured contract

Prefunded through specialized life insurance policy; if the insured dies while making payments on policy, balance due is paid by insurance company depending on health questions answered and within 1-2 years

-Long term payment options: Paying for funeral + insurance premium (multi-pay; often monthly)

-Total amount paid - Funeral selected= cost of

insurance

-Lump-sum payment (single-pay)

uninsured contract

Prefunded through specialized life insurance

policy; if the insured dies while making payments on policy, balance due is paid by NOK

-Not very common

-May or may not be price-guaranteed

who can sell unfunded preneed contracts?

anyone

who can sell funded preneed contracts?

FD (some states FD only, some allow trust funded without a license, insurance funded needs license), FH employees (trust funded do not always require a license, 1099/independent contactor, as compensation)

insured

is the person for whom the prearrangements are made

owner

person who pays for policy

assignee

person/entity receiving funds that are paid (often FH)

beneficiary

person who will receive unused funds (if there is any and FH refunds excess)

insured: adult children

owner: Paul

assignee: FH

beneficiary: children

Paul, a grandpa with adult children, would

like to get his adult children pre-paid

funeral arrangements. He intends to pay for

their funerals. Dan and Sarah are his

children. They each have two children who

will receive any additional funds

premium

payment made to insurance company (single or multi-pay)

cooling off rule

FTC rule with 3 day right to cancel if the sale is made in a temporary location.

free look

30 day period with insurance funded through FH

multi-pay

total paid will exceed the original amount of funeral selected

-to lock in price but at a monthly price they can afford (early pay off possible, depending on policy)

graded policy

when there is a waiting period before the policy will pay in full ("yes" to one or more health issues)

-die before 1-2 year period: amount of payments and interest

-die after 1-2 year period: usually pay in full

health questions - underwriting

to determine if policy will pay total amount of policy if death occurs before all payments are made

first day coverage

'no' to all health questions, no health problems

contestable policy

when death occurs within first year (or two) insurance company will ask for medical records to confirm initial health questions

trust

bank account set up by FH to deposit monies given to FH to fund prearrangements (need tax ID and permit to open, either regular or separate bank accounts or set up through trust department at a bank)

10%

in some states, FH can take this much of the contract total

third-party contract

legally binding agreement between two parties that created obligations for an outside party

authorizing agent

this supersedes NOK

cannot

guaranteed prices can/cannot change

cannot

irrevocable can/canot be terminated

preneed unavailable at death

must offer equal or greater value or give credit for items not provided

minor changes

changes that do not affect guaranteed contract (location)

form of disposition, downgrading payments, not paying as agreed

alterations that avoid guaranteed contract

assignment

at-need promise of payment by beneficiary for goods and services; funds sent directly to FH, excess sent to beneficiary

pre-assignment

benefits in good faith or by making FH beneficiary (not considered for funded prearrangment)

POD account (payable on death)

totten trust account, savings account created to be paid out at death to beneficiary, not subjectable to probate, can be used at any FH and moved to bank, taxed earnings, countable asset by Medicaid

Wills

instructions for death may be included, families do not always know where or if it exists, may have trouble accessing it depending on location

Consumer trust

many available types, sometimes used as part of comprehensive estate plan, does not take place of a will, controlled by trustee who makes payments to FH

Steps for prepanning

talk about it, write it down, pay for it

power of attorney

allows principle to grant authority to an agent to handle all or some affairs, ceases at death

durable POA

effective even if principle becomes incapacitated

affadavit

in some states an individual can transfer authority to another person to make at need arrangements (IL law 755 65/10)

first day coverage

no health problems

graded policy

has health issues

contestable

has no health issues, but died within 2 year window (medical records will be reviewed to see if they lied)

comptroller

in IL, who licenses preneed providers

comproller and insurance

what license do you need to sell preneed services funded through insurance

lump some

which payment method is cheaper, lump sum or multi-pay