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.
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.