Pre-paying for funeral services with a trust account
Trust accounts are basically a pre-payment
for funeral services deposited in a bank or with a trust company. Because the
bank is federally insured by the US
government, the funds are 100% totally secure.
If the funds are put into a larger, pooled
trust, such as the state-controlled New Jersey Trust Fund, they may earn a more
competitive high rate of interest.
Regulations regarding trusts vary from
state to state. You will need to ask your local licensed funeral director about
the programs available in your area.
The big advantage of a trust is that upon
death, the payment can be made promptly to the funeral director. In some cases,
a trust account can earn a higher return than a pre-need insurance program. One
thing to keep in mind, however, is that a trust is taxable in contrast to
pre-need insurance policies which are not.
The pre-need trust program comes in another
form called an irrevocable trust. This means the funds are designated for a
funeral service and cannot be spent otherwise. An irrevocable trust can be
beneficial when applying for Medicaid or other social services because it
cannot be counted as a financial asset.
You will need to sit down with a licensed
funeral director and figure out the options available to you and which program
suits your particular needs.
With any pre-paid
funeral service, there are several questions you should ask.
To see our
helpful checklist, click here.