Are Funeral Trusts a Good Idea?

Setting aside money to take care of any large expected or unexpected expense is a smart thing to do. People do it all the time for that new car or the dream vacation to Hawaii.

Setting money aside for a funeral is no different than saving money for those other items.

More and more people are pre-planning their funerals to save loved ones the stress of having to do it. And when you make your own arrangements, it can also save money because you can specify which type of service you want.

A funeral trust is an arrangement entered into with a provider of funeral or burial services. Prepaying funeral expenses may allow you to lock in costs for future funeral or burial services at an agreed-upon price.

Over the last 30 years, the average price for a funeral (and a modest one at that) has increased by more than 200 percent. The average cost for a traditional, adult funeral with a viewing and burial nowadays is between $7,000 and $10,000. That price does not include the cost of the actual burial plot/site or the headstone, which is several thousand dollars more.

Right now, regardless of whether you’re healthy and fit as a fiddle, or you have a loved one looking at a nursing home, paying for your funeral now could work in your favor.

Elder Advisers has access to the necessary resources to navigate and answer questions you may have about your loved one’s health and wealth needs.

The technical term is called an irrevocable funeral trust, or for simple terms, a funeral trust. It is a type of trust used in estate planning to set aside funds to pay the cost of final arrangements, such as funeral services, cremation and burial.

You establish a funeral trust purchasing a policy from a third-party insurance company whose sole job is to manage and oversee funeral trusts. At time of death, the family calls the company and gives a policy number that was issued when the trust was established, and within 2 business days, a check is sent to the funeral home of your choice. A few weeks later, after some paperwork is submitted, the remaining money (with the interest figured in) is returned to the family.

If you’re in good health, purchasing a funeral trust is just a great example of preplanning. What a gift that your family does not have to worry about.

If you’re concerned funds in your estate may not be immediately available to pay your funeral and burial, due to probate or a will dispute, a funeral trust is the way to address that concern. One of the advantages of this type of trust is the funds you set aside should be available within a few hours or days. This means your funeral service can proceed as planned, even if your estate has to go through probate.

A funeral trust may also help you qualify for long-term care benefits, such as Medicaid. These trusts may be funded with assets that would otherwise be countable resources for Medicaid. You can fund the funeral trust right before entering the nursing home, and there’s no look-back period for these transfers.

Another positive to having a funeral trust is, you’re not committed to using at a specific funeral home or location. The family-owned, neighborhood funeral home which has handled your family’s funerals for two or three generations may not still be in existence when you need it. That is not a problem with a funeral trust. Your brother in Florida can contact the funeral trust company in Ohio, for example, and have the money sent to a funeral home in Indiana. It’s that flexible.

The process also works if your loved one wants to be cremated or have his or her body donated to science.

Perhaps the biggest reason behind purchasing a funeral trust is peace of mind. By purchasing a plan now, your loved ones will not have the stressful task of planning a funeral for you as you have already made the necessary decisions. This is one less stress for them during a difficult time. Your family can focus on being with loved ones.

Who’s going to benefit from all this? The family. They won’t have to worry about scraping money together to pay for Mom’s funeral, plus Mom and Dad, or whoever has the funeral trust, is able to pass money on to the family, which is the ultimate goal, right? This is one way for their legacy to be passed on to the family.

Making these kinds of decisions now gives your family time to rest and grieve your loss instead of making hurried decisions. They are not left wondering if you would have approved.

Elder Advisers® is not a law firm or a substitute for an attorney. We offer financial advice. We can work closely with your existing tax and legal advisors or introduce you to those we routinely work with. Nothing in this newsletter is intended as tax advice, a solicitation for insurance, or legal advice, and is merely provided as general information, and should not be relied upon for anyone’s specific or unique circumstances. Some content of this newsletter may have been developed by third party sources not affiliated with Elder Advisers®. If you would like to discuss your situation, we are delighted to help. CALL (800) 763-7930.