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Blog > Advance Planning > What is a Funeral Trust? [Pros, Cons & Strategies]

What is a Funeral Trust? [Pros, Cons & Strategies]

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February 15, 2022 Advance Planning

Looking for a way to help spend down your countable assets for Medicaid eligibility for long-term or senior care? With an irrevocable funeral trust, you can spend down your assets and provide peace of mind for your loved ones for your end of life expenses.

What is a Funeral Trust

A funeral trust is a fund set up to help pay for your future end of life costs; this can include things like a funeral or burial costs. Many people choose to create these trusts to ease the burden off their loved ones in the future.

What is an Irrevocable Funeral Trust?

When creating your funeral trust you can choose to have it revocable or irrevocable meaning you can choose whether you continue to control the assets in the trust and can change the terms or you transfer control of the assets to a trustee. 

Which option should you choose is completely up to you and whether or not Medicaid Planning will be a requirement in the future for you to fund your care. Continuing on in the post, we will assume you will be using an irrevocable funeral trust.

What Expenses Does a Funeral Trust Cover?

The types of expenses a funeral trust will cover include:

  • Casket
  • Hearse
  • Funeral services
  • Embalming
  • Cremation
  • Headstone
  • Burial plot
  • Death certificates
  • Cemetery fees
  • Clergy fee
  • Musicians for Service

There is a limit on how much can be funded into a funeral trust and, in most states, a funeral trust cannot exceed $15,000. However, you will want to check with a Medicaid Planner if you’re hoping to apply for Medicaid eligibility in the near future because some states have a lower amount allowed.


Benefits of a Funeral Trust

There are a number of benefits that come with creating a funeral trust, but we want to highlight the most important ones:

  • Doesn’t Count Towards Medicaid Eligibility: All the assets put in an irrevocable funeral expense trust will not count towards your countable assets for Medicaid.
  • Peace of Mind for Loved Ones: Your family will be grateful that you made the decisions necessary for end of life services and were able to fund them appropriately so that burden didn’t fall to your children and loved ones.
  • You get to Choose What You Want: You will get to choose what kind of services you want, the types of flowers, etc. so your family won’t have to decide in the future.

Disadvantages of a Funeral Trust

With many pros, there are still a few cons which include:

  • Can’t Be Revoked in the Future: Once the trust is set up, there is no way to get your assets out of the trust if you needed the funds for a different reason in the future.
  • May Not Transfer: If you create the trust in one state, but pass in another state, the funeral trust may not be transferred to your new state.

Strategies for Funeral Trusts

Funeral Trusts can be used to spend down for Medicaid and all the funds in the trust will be exempt from counting for Medicaid purposes. In addition, if you use a Medicaid Compliant Annuity with a Funeral Trust, a large portion of your assets can be protected from being countable.

If you plan to pay for your own care in the future, funding a Funeral Trust is still a great option to help you allocate the funds you want to use towards your end of life expenses. This way, you will already know how much money you have to pay for care and other end of life expenses.

Find out which strategy works best for you by using our free planning wizard which will outline your planning options within minutes! 

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