With any life insurance policy, a designated beneficiary can technically and legally direct the spending of the death benefit however they choose. Therefore, it is important that a policyowner name someone they trust to fulfill their funeral plan. However, the only way to guarantee this will happen is to assign a life insurance policy or to create a legal will.
Assignment is the transfer of the right to the death benefit from the insurance company directly to an assigned party. The assigned party is normally a funeral home. However, the assigned party must agree to accept this type of transaction. In the case of a funeral home, most will not accept this transaction, so this is not a viable payment option. Funeral homes like upfront payments and do not like to wait for the insurance company to payout as they generally take longer than if the upfront payment came from the personal funds of the executor of an estate. In this type of transaction, however, the funeral home is the primary beneficiary and another party is the secondary beneficiary who receives any excess money not required to fund the funeral plans of the insured.
A legal will is a legal document that states how the insured wants their assets to be distributed and liabilities to be paid for when they die. The legal will can direct a person to be named the executor of an estate and to manage all funeral plans. In the legal will, an insurance policy that includes the executor of the estate as a designated beneficiary can also direct this person to use these proceeds only for funeral plans and any excess at their discretion.