BALTIMORE — The pandemic has caused families to plan funerals much earlier than expected. Nearly 6,500 Marylanders have lost their lives to COVID-19 in the last year.
Preneed contracts help families honor their loved ones wishes, however, consumers are finding out that having prepaid arrangements doesn’t mean everything is paid off.
In the span of nine months, Edward Fields Jr. lost both of his parents.
“My mom passed in January 2019,” said Fields. “In October, same thing happened.”
Fields’s parents had preneed arrangements at different funeral homes. His mom’s at Lilly and Zeiler Funeral Home in Baltimore City.
“She was cremated, they honored the agreement, there were no additional costs,” Fields said.
In 2006, his mom paid $2,617. In 2019, the total cost for the funeral was $3,239. After interest, the funeral home took a loss of $474.
In October, when Fields had to go through the same process with his dad, he thought he knew how it would go.
“And I said it was very seamless with my mom. We said, ‘Oh, we’ve been through it once, we know what to expect, but we didn’t expect this,'” Fields said.
In 2012, his dad paid Mitchell-Wiedefeld Funeral Home $3,947.50. In 2019, with inflation, the total came to $5,759.10.
The funeral home deducted interest and took a $774 loss, but a month later, the family received a bill for over $500.
“We said this has to be wrong, it’s prepaid. And then we got another bill in January and we had to settle the estate. You can’t settle the estate and then put a lien against the estate, so they put us in the position where we had to pay the cost and you know, we absorbed it out of the estate, but we shouldn’t have had to absorb it that’s why my dad took care of it," said Fields.
Fields also didn’t understand why one funeral home didn’t charge anything additional while the other did.
The answer has to do with the kind of contract and a shift in the funeral home industry.
A change in the funeral home industry
Funeral homes used to guarantee everything in preneed contracts, even items outside of the services they offer.
“A death notice, locally that’s going to be the Sun papers charge. Death certificates, the Maryland Health Department charges for those. Could be costs for church, clergy what have you,” said John O. Mitchell IV, president of Mitchell-Wiedefeld Funeral Home.
Funeral homes would then cover any cost increases with interest accumulated through a bank Certificate of Deposit.
“It was just whatever is in there pays for it and that’s that. Over time, as CD rates got lower and lower, we were seeing a shortfall in seemingly every prepaid funeral that we had, so we looked to a different funding vehicle,” said Mitchell.
That became insurance policies. And a state law in 2002 allowed funeral homes to make this change as well as only guarantee services they offer.
However, not every business immediately made this change, which is why Fields’s mom’s contract in 2006 covered everything, and his dad’s contract in 2012 is more akin to contracts issued today. The contract guarantees the funeral home’s services, and the services not controlled by the funeral home, known as cash advance items, are non-guaranteed.
“If they’re not the one who engaged in the contract and they don’t realize that certain items are not going to be guaranteed and they’re told mom took care of this, dad took care of this, they are under the understanding it’s all taken care of. So, if there is a shortfall in the non-guaranteed area they’re not expecting that,” said Mitchell.
Businesses can set their own prices. No government agency regulates or monitors costs increases.
The Maryland Board of Morticians and Funeral Directors oversees that sellers perform the contract according to the contract's terms and at the agreed upon price, however, the Board didn't find a violation in this situation.
How to avoid surprises
Consumers are encouraged to ask questions and have a full understanding of what services are guaranteed, or completely paid off, and what could cost you later on.
To keep costs down overtime, consumers can seek a guaranteed contract directly through a large cemetery, whereas small church cemeteries are unable to take prepayments and hold them in a trust.
Consumers can also ask to pay more upfront to better account for cost increases later on.
The Federal Trade Commission issued a rule mandating funeral homes disclose pricing in-person or over the phone before signing a contract. Consumers also have a right to buy separate goods and services, and are not required to purchase a package.
Funeral homes that violate the Funeral Rule could be issued a penalty for up to $40,000.
For more information on the Funeral Rule and shopping for funeral services, click here.