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Consumer advocates, financial planners and funeral directors agree — preplanning a funeral is a good idea.

"It saves a family from entering a funeral home on the worst day of their life uninformed and uneducated," said funeral director Charles Anderson of Anderson Funeral Home in Franklin and Springboro.

But on prepaying a funeral they disagree.

"To my mind, it doesn't make sense to give your money to a funeral home in advance," said David A. Kay, a certified financial planner in Centerville. "Anytime you pay in advance for anything, you're benefiting the people you're paying in advance."

Prepaying or not, all agree it's smart to save for your funeral, as the average funeral in America runs $6,500, not including headstone and burial costs, according to the National Funeral Directors Association.

So to head off an even costlier funeral years ahead, more Americans — particularly baby boomers — are planning and paying for their funerals ahead of time, accounting for about 40 percent of all funerals today, according to the NFDA.

"Having your funeral prearranged and prefunded allows the family, and honestly the funeral director, to help them and assist them in celebrating the person's life and make this as memorable an experience as they possibly can," said Anderson, also the founder of The Outlook Group in Franklin, a company that specializes in "pre-need" funeral planning. "You do this one time in life, so there are no do-overs."

Complaints

Along with their rising popularity, pre-need funeral plans are also the No. 1 reason consumers call the Ohio Board of Embalmers and Funeral Directors to complain.

Of 157 complaints in fiscal 2006, more than a third, or 62, concerned pre-need contracts. This year, board staffers predict up to 80 percent of the complaints will concern pre-need.

"It's a variety of things, not one (type of complaint) stands out," said Ann Cunningham, the funeral board's executive director.

Oftentimes, Cunningham said, the consumer's confused over what's covered under the contract and what's not covered — preacher fees, flowers, obituaries, etc. Perhaps they haven't read the contract carefully, nor have they shared it with family members.

Also, some don't realize the accrued interest in a pre-need account is intended to cover the cost of inflation; it's not a return on investment for the family to inherit after death, she said.

"We need to educate both sides," Cunningham said. "We need to lay down the law and say to the funeral director, 'This is what you tell them, you disclose everything and you pray they read it.' And to the consumer, you ask every question you can think of. There's no dumb question."

Guarantees?

There are two main types of pre-need funerals: insurance-funded plans and those placed in an interest-bearing trust fund. The plans can be revocable — you can get your money back — or irrevocable, locked in for the funeral bill.

Whether insurance is funded or in a trust, the key question consumers should ask is if the contract is guaranteed, said Stephen J. Gehlert, executive director of the Ohio Funeral Directors Association.

"In other words, what I buy today at $5,000, if it costs $10,000 when I die, is the money going to be there and are you guaranteeing it?" Gehlert said.

If the money is in a trust fund, the consumer typically will receive a letter from the financial institution confirming the money is trusted. But if it's funded by an insurance policy, there's currently no assurance the money safely went to the insurance company.

"It may not have," said Marie Lorz, past president of the nonprofit Funeral Consumers Alliance of Central Ohio. "It certainly didn't with 130 families in Circleville."

Earlier this year, Circleville funeral director Brent Peters admitted taking at least $700,000 from 128 pre-need plans in the past decade and diverting the money for business expenses. The admission came after one of his employees tipped off the state funeral board, which stripped Peters of his funeral licenses and shut down his funeral home about 30 miles south of Columbus.

The board found Peters had filed false death certificates and collected insurance money for funerals that never happened. Authorities later determined up to $1 million in funeral funds may have been involved and more than 150 clients affected.

Peters, 43, pleaded guilty to theft charges Wednesday in Pickaway County Common Pleas Court. He could be sentenced to up to 15 years in prison.

A similar case arose in 2004 in Springfield, when the Ohio Department of Insurance investigated funeral director John W. Allgier II of Woods-Allgier Funeral Home. Allgier allegedly had forged death certificates and insurance documents to collect money on at least 21 pre-need customers.

The 47-year-old funeral director died later that year from a self-inflicted gunshot wound.

In light of those cases and other concerns, the funeral board is working with the Ohio Funeral Directors Association, the Ohio Department of Insurance, Lorz's group and others on legislation they say will strengthen consumer protections.

One proposed measure requires financial institutions and insurance companies to send a letter to the consumer within 60 days confirming receipt of the funds or that the insurance policy has been issued.

The draft legislation also would create a statewide recovery fund to reimburse families who lose pre-need funds to unscrupulous funeral directors.

If the legislation becomes law, Cunningham said the board will need additional staff to handle the extra work.

"We're looking at different states, trying to figure out what works best," she said.

Invest in other ways

Funeral directors say pre-need funerals spare families the stress and added grief of planning and paying for a funeral when death arrives.

But that hasn't been the case for the late Belva Tickel's family.

In 1990, Tickel, then 68, signed up for a $6,000 funeral plan at Gebhart-Schmidt-Parramore Funeral Home in Miamisburg. The price covered a casket, vault, viewing and virtually every arrangement except the flowers, obituary and preacher fees.

Over the next seven years, the Miamisburg resident paid monthly installments that totaled nearly $9,000, with the excess covering the insurance company's financing fees, according to her family and records provided to the Daily News.

When Tickel died nine years later in October 2006, the balance in her pre-need policy was $9,175. To her family's shock, though, the price of her funeral had grown to $10,600 — 80 percent more than when Tickel signed the contract in 1990 and 28 percent more than the rate of inflation. Tickel's casket alone had risen 75 percent in price, from $2,100 in 1990 to $3,675 in 2006.

A similar funeral for Tickel's son-in-law just a few years earlier at the same funeral home had cost just $6,200, Tickel's granddaughter, Jodi Gillman, said.

While the funeral home didn't charge the Tickel estate more than the policy balance, Tickel's family feels their mother and grandmother would have done better to save or invest her money in other ways.

"People need to know it's a rip-off, because that's what it is, a rip-off," Gillman said of pre-need plans.

Asked about the Tickel contract, Gebhart-Schmidt-Parramore funeral director Doug Parramore replied: "That's the only complaint we've had in 25 years. You know what, they just didn't understand. You could not get it through to them how this worked."

Gehlert, the OFDA director, said he's heard such concerns before.

"The key thing, and I stress this to consumers, (is) if you have a guaranteed contract, what you've purchased is a funeral, not an investment contract," Gehlert said. "So it really shouldn't matter how little or how much that grew because if it's guaranteed, the consumer will get the funeral that they purchased."

Other concerns

Consumer advocates warn of other pitfalls with pre-need contracts.

In Ohio, if you want to cancel or transfer your pre-need plan that's in a trust, the funeral home can keep 10 percent of the principal and 20 percent of the interest that's accrued.

"This needs to stop," said Joshua Slocum, executive director of the national Funeral Consumers Alliance in South Burlington, Vt. "Ohio needs to follow the lead of many other states that have 100 percent trusting and refund (such as New York). This is not the funeral home's money until they perform the funeral. It is the consumer's money."

Medicaid eligibility

Gehlert, whose association administers a trust fund for pre-need funeral money, said a primary motivator for purchasing prefunded funerals is the money can't be counted against a consumer who might one day try to qualify for Medicaid, the state and federal government health insurance program for the poor.

"It's a very valuable tool, and probably 75 percent of the money in the OFDA trust is irrevocable contracts that are being used for Medicaid purposes," Gehlert said.

Slocum cautions that consumers shouldn't bind their money to a pre-need funeral contract unless Medicaid is "imminent — not years away."

His funeral alliance and AARP, the nonprofit advocacy group for Americans 50 and older, suggest putting your money in a "pay-on-death" account, a private, irrevocable trust at a bank with a designated beneficiary.

"If you're planning more than five years out, I would agree," said estate planner Joseph Balmer, an attorney with the Dayton law firm Holzfaster, Cecil, Mcknight & Mues. "But if it's a shorter window, there aren't too many options."

That's because Medicaid, if it's in your future, will look at your financial records for the previous five years in determining eligibility, Balmer said. The insurer views private, pay-on-death trusts as gifts and not subject to exemption.

So what's the answer?

Kay, the financial planner, offers this advice: "The bottom, bottom line, talk to your relatives, explain your wishes, find out what's important to them. Let them know what your final wishes are."

Contact this reporter at (937) 225-7408 or agottschlich@DaytonDailyNews.com.