Funeral Trusts are a type of irrevocable trust created expressly for the purpose of paying your final expenses. The trust contains, as its asset, a single premium life insurance policy. (These policies are only offered by a select group of insurance companies.) The policy is placed into your funeral trust, where it remains until you pass away. Because your funeral trust technically “owns” the insurance policy, and because the law treats assets owned by trusts in a unique way, funeral trusts may offer potential benefits in terms of tax savings, protection from inflation, and favorable treatment by Medicaid qualification rules. Additionally, the money you place in your funeral trust can be used to pay a variety of final expenses. Here’s just a partial list of the things that your funeral trust funds can pay for:
- Dressing / Cosmetology Casketing
- Funeral Service
- Memorial Service
- Graveside Service
- Clergy Honorarium
- Death Certificates
- Temporary marker
- Stationery package
- Obituary notices
- Casket or other burial container
- Transfer of deceased (including hearse and driver)
- Cemetery / Burial Plot
If you think that you’re too old to qualify for a funeral trust, you’re almost certainly mistaken. Anyone age 99 or younger is guaranteed to qualify for these products… and that’s with no underwriting (in other words, no medical questions or exams!) Failing to create a funeral trust can have clear disadvantages. You could lose the assets you’d originally set aside to pay for your funeral and final expenses, instead spending that money to pay nursing home or medical care, or having to “spend down” those assets in order to qualify for Medicaid.
Final Expense Insurance
Final expense insurance, also known as “burial” insurance, is often a vital part of estate planning. This type of insurance is a life insurance policy that you buy directly from an insurance company. Additionally, if your final expenses cost less than the benefit amount of your policy, your beneficiary is entitled to keep whatever sum remains after paying all your final arrangement bills. Most are either “simplified issue” policies or “guaranteed issue” policies. For a simplified issue policy, the insurer asks you several medical questions but doesn’t require you to take a medical exam. A “guaranteed issue” policy, as the name implies, is a “no questions asked” policy that is issued to anyone who applies.