Views Vary on ‘Pre-Need’ Burial Plans

Question: My parents, like many immigrants, joined one of those benevolent organizations, which, in addition to social activities, provided a burial society in which members organize a group contract for funeral arrangements in whatever their ethnic culture is. The group buys a large plot with each member receiving a grave lot.

My parents were from Palestine and this arrangement was with a large Jewish mortuary in Los Angeles, which is still in business, and with Home of Peace Cemetery. The contract was drawn up in 1934, and in 1978 the society disbanded, as many of its members were getting older and less interested in its other activities. Each member, however, was mailed a copy of the mortuary contract and the plot deed for their protection, although no trouble was foreseen in the contracts being honored.

When my mother died last year at the age of 95, the cemetery honored the deed without question, but the mortuary claimed that the contract was no good, because the society no longer existed. Instead of charging me $75 (remember this was drawn up in 1934), the funeral home charged me $2,000.

The thing that disturbs me is not the money but the fact that there are still 27 members of the old society still living and holding these worthless contracts. And because these burial societies are something of an old-fashioned custom among many immigrant groups, it raises the question as to how many older people all over the country are being shafted the same way by the whole mortuary industry.--H.H.

Answer: Burial societies--either operating independently or as an adjunct of a benevolent or fraternal organization--were never as commonplace as, in retrospect, it seems they were, although, at about the turn of the century, they certainly existed, according to Charles Robison, longtime legal counsel in Naperville, Ill., for the National Fraternal Congress, a nonprofit trade association that provides fraternal groups with information about life, accident and health insurance.

“They were either authorized by statute or, at least, not prohibited,” Robison adds, “but in more recent years, practically all of the states have strengthened their insurance codes in such a way as to prohibit the formation of burial societies.”

Part of the problem with the old burial societies, he continued, was a growing tendency toward a conflict of interest--burial societies becoming owners of funeral homes. This move left members with no choice but to go to the designated XYZ Funeral Home. The states not only knocked out the old burial societies, per se--beginning in about the 1940s--but most also now prohibit fraternal or benevolent societies themselves from any ownership of funeral homes.

“But back at the turn of the century,” Robison added, “it was common for benevolent organizations to offer a benefit that would guarantee its members a grave plot, a monument or tombstone and some flat amount--like $500--to the widow, although they weren’t, technically, burial societies.”

Nationally, according to Roy T. Pfeffer, president of the National Funeral Directors Assn., “there’s been no specific instance that I know of” similar to your experience. “Burial societies early in the century were a lot more commonplace in the South than anywhere else but, even there, they were usually for a flat amount--$300 to $500 was prevalent--which went to the family at the time of the member’s death. Which, of course, is not quite the same thing as the situation your letter writer has described.”

And Roger Duerksen, administrator for the California Funeral Directors Assn. in Sacramento, also recalls no state situation involving a 53-year-old agreement between a burial society and a mortuary still in business that might, or might not, be legally binding.

“Although I seem to recall in the past,” he said, “that there were some isolated instances where similar arrangements were made and the funeral home holding the money went out of business.”

The consensus, then, seems to be that the sort of casual, flat-price, infinite-life arrangement that your parents’ benevolent society entered into with a specific funeral home and a specific cemetery was never very common.

Even with the old (1880), large (300,000 members) and ethnic Polish National Alliance of the United States, president Aloysius A. Mazewski in Chicago says: “We never did subscribe to the burial society approach. We’ve always had an insurance plan, however, but it’s a straight life insurance policy. And, I think you’ll find that this is the approach that practically all ethnic benevolent groups have taken for a long time.”

All of which, ironically, flies in the face of an apparent modern contradiction. Although not calling themselves “burial societies,” more and more mortuaries, funeral homes and independent organizations are selling more “pre-need” plans than ever before.

“We’ve seen a big upswing in popularity in the last 10 to 15 years of societies selling programs like this, but, around here,” according to the California Funeral Directors’ Duerksen, “most of them are slanted toward cremation. The association’s not overjoyed with such memorial societies, because we see them as middlemen in the funeral process.”

“The whole selling campaign that’s going on now, on television, in magazine ads and by direct mail, make the pre-need business a major growth industry,” according to Lee Norrguard, senior program specialist for the American Assn. of Retired Persons in Washington.

“My understanding is that, nationally, pre-need sales have jumped from about 176,000 in 1976 to 600,000 last year and are expected to reach 2 million a year by the year 2000, he said. “And because 65% of the buyers are over the age of 60 and another 25% are 40 to 60, it’s obviously impacting the AARP’s membership quite heavily.”

Which puts the AARP in something of a bind, because the amount of money entailed in these pre-need plans can be considerable--and the potential for loss exists--but, at the same time, the AARP is a firm believer in planning ahead.

“Some of these pre-need plans can cost as much as $4,000 to $6,000 up front,” Norrguard adds, “and while we believe in pre-planning, we don’t necessarily feel that pre-need is the best way to go.”

The AARP’s first advice--know exactly what your money is buying before you pay it out. Here are the various pre-need plans available:

Guaranteed Price, Revocable-- Not available in all states but, essentially, this is what your parents thought they were buying in 1934: a guarantee of the funeral you want regardless of future price increases. You can also change your plans and get a partial, or full, refund.

Non-Guaranteed, Revocable-- This doesn’t guarantee that the money you pay will cover the funeral--your survivors may have to come up with the balance. The “revocable” part means you can get a partial or full refund.

Guaranteed Price, Irrevocable-- You’re guaranteed your funeral at no extra cost, but you can’t get a refund if you change your plans.

Non-Guaranteed Price, Irrevocable-- Not recommended by the AARP. The money you pay will go toward your funeral, but it isn’t guaranteed to cover the whole cost and you can’t get a refund.

Insurance Policy-- There are life policies available where a funeral home can be designated as the beneficiary. Again, though, it doesn’t guarantee that it will cover the entire cost, and, if you change your mind and cancel the policy, the cash value you receive may be less than you’ve paid out.

Norrguard says some alternatives recommended by the AARP are a savings account listing a beneficiary with whom you have left funeral instructions or take out a new life insurance policy specifically for your funeral or increase the amount of insurance you have and leave funeral instructions for the beneficiary.

Now, what about your dispute with the funeral home?

Sorry, but because you informed me in a follow-up phone call that the matter is currently in litigation--and that your law firm is handling it on a pro bono basis--I can’t really inject any opinion here. That might muddy the waters.