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.

Irrevocable trust

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.