Pros and cons of funeral trusts

"Here in Tennessee, a couple of large funeral homes got into very serious trouble because they were taking people's money and putting it into the business instead of a trust," Lewis says. "When they went bankrupt, there was no money there for a whole lot of people who had paid for pre-need."

While the pitch is that you save money by locking in today's prices, he says, "I suspect some funeral homes are making an extraordinary profit on them by billing the trust for high-priced funerals."

Not a common product

In fact, funeral trusts are so little used by professional planners that information about them is not included in the course work for certification, says Marilyn Capelli Dimitroff, a CFP with Capelli Financial Services and immediate past chair of the Certified Financial Planner Board of Standards, an independent certifying body for the financial planning profession.

"As financial advisers," Dimitroff says, "we tend to build funeral expenses in as part of overall planning rather than set up a specific trust."

How to set up a funeral trust

Before making a funeral home your trustee or beneficiary, Grillo recommends confirming that proceeds from the trust will be accepted as payment to avoid putting a burden on your heirs.

"A funeral trust seems like a great idea," she says, "but you must keep your information current or major problems will come your way. If you relocate, change the trustee and beneficiary to the new funeral home you will use. Provide your executor or all your heirs with a copy of the trust as well as contact information for the funeral home and the beneficiary, if they're different."

While Harrison's experience was positive, she warns that a funeral trust should never be considered an investment vehicle.

"There's some validity to locking in prices in advance," Grillo says, "but its true value is your family's peace of mind."

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