Funeral Trusts

Funeral trusts are widely used to set aside money for anticipated funeral costs. You can establish a funeral trust by depositing money into an interest bearing trust account. When you die, the trust funds will be disbursed to the funeral home, cemetery or other service provider that you have designated as the primary beneficiary in the trust agreement.

Generally, after the funeral costs have been paid, any amount remaining in the trust will be distributed to your estate, unless you have entered into a pre-need agreement that provides otherwise. Also, your pre-need contract should specify what happens if the amount in your funeral trust is not sufficient to cover all costs. Unless you have a fully guaranteed price, you may be responsible for paying the shortage.

You can open an individual trust account with a bank and deposit your money in a savings account or certificate of deposit. Another option is to participate in a master trust program that is professionally managed. Here, the funds of many individuals are invested into relatively safe instruments, such as U.S. government bonds. Generally, your interest income from a trust account is taxable and must be reported on your income tax return.

There are various factors to consider when establishing a funeral trust. Should the trust be revocable or irrevocable? What affect will the trust have on your ability to collect benefits under Medicaid or other social service programs? Trust laws vary by state, so its best to have a funeral director or cemetarian explain the local regulations and help you establish a funeral trust.

See related topics:

What Does a Funeral Cost?
Advantages of Paying for Your Funeral in Advance
Pre-need Funeral and Burial Contracts
Funeral Insurance
Prepaying Funeral Providers