Did you know you can create a funeral trust to cover the costs of your funeral? This is created when you make arrangements with a funeral home before you pass away. When you do this, you contract the funeral home ahead of time for your burial and funeral services.
You can create a funeral trust and add it to your estate plan. However, to know if this is something you should do, read more about them here.
How does a funeral trust work?
The funeral trust lets you put money aside for your estimated funeral costs. When you create the trust, you make arrangements with a funeral home or cemetery to provide the needed services after you die. The trust’s beneficiary will be the funeral service provider you choose. The IRS sets specific rules that you must abide by when creating a funeral trust, which includes:
- The trust is with an entity that provides burial or funeral services.
- The trust’s purpose is to hold, invest, or reinvest funds to pay for burial or funeral services.
- The beneficiaries are individuals who are providing burial or funeral services.
- The only contributions made to the trust are for the beneficiaries.
What to consider when setting up a funeral trust?
Before setting up the trust, ensure you find out what happens to the remaining funds after all funeral costs are paid. It’s important to have this outlined in the contract with the service provider. You also need to consider if you want to set up an irrevocable or revocable trust.
Is a funeral trust right for you?
Deciding if you should establish a funeral trust is something you should discuss with your estate planning expert. It may help provide peace of mind that your family doesn’t have to deal with this after you pass.