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How do Funeral Homes Collect Payment?


How do the funeral homes collect payment? My father passed away and an outside member of the family signed the life insurance over to the funeral home but she was not the beneificary. Since she signed the contract at the funeral home, what happens if she does not pay? We are unable to collect from the life insurance without a paid itemized bill.

My best advise would be to consult an attorney for legal advise regarding this situation!

The outside member of the family who signed the bill with the funeral home is now legally responsible for the contract. The proceeds of the life insurance policy should be paid directly to the beneficiary. Unless the beneficiary of the Life Insurance Policy has personally signed an assignment of proceeds from the policy, the insurance company will not pay any benefits.

One situation that can alter this would be: the beneficiary is a minor and the guardian of the minor who has legal rights for the decisions of said minor (and has legal, documented proof of these rights) assigns the proceeds of the policy to the funeral home. If the person who signed the original contract with the funeral home does not pay the bill, the funeral home has a few things they can do.

The funeral home can work out a payment plan with the debtor. The funeral home can use a collection agency to collect the bill. This will cause the debtor problems with their creditworthiness. The funeral home can put a lien on the property of the estate to claim payment. The funeral home can sue the person for breach of contract. The funeral home can send a letter to the debtor informing them that the funeral was a gift, and then send the debtor a 1099 form at the end of the year for the amount of the funeral. The debtor will not owe the funeral home anything, however the 1099 form will cause the IRS to audit the debtor because it will be considered income in the amount of the funeral.

Also the debtor will incur the tax burden of the amount of the funeral as personal income. Again, I stress you should consult an attorney for legal advise regarding this situation. I hope that this will help with you. -- Stephen Dawson

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