Funeral Trust

A funeral expense trust can give you the peace of mind that comes with knowing your final arrangements are taken care of while lessening the burden for your family.

There are so many decisions that need a family’s attention when a death occurs. A funeral trust offers a unique strategy that allows you to set aside money that can be used to pay final expenses, pass money to your heirs tax free and help provide additional income in a time of need.

There are various factors to consider when considering a funeral trust. Should the trust be revocable or irrevocable? What affect will the trust have on your ability to collect benefits under Medicaid or other social service programs? What are the maximum benefits and will it cover my final expenses? Since trust laws vary by state, get in touch with your local GCB agent to see how a funeral trust can benefit you and your family.



Here are a few questions and answers to get you started. Visit for in-depth information and articles on specific topics.

Funeral trusts are used to set aside money for anticipated funeral costs. You can establish a funeral trust by depositing money into an interest bearing trust account. When you die, the trust funds will be disbursed to the funeral home, cemetery or other service provider that you have designated as the primary beneficiary in the trust agreement with any excess funds going to the estate.

The Internal Revenue Service defines a funeral trust as “a ‘pooled income fund’ set up by a funeral home or cemetery to which a person transfers property to cover future funeral and burial costs.” They’re also referred to as pre-need programs.

An irrevocable trust, once established cannot be dissolved until the terms are satisfied. The person named as the grantor or creator of the trust must pass away before the terms of the trust can be executed because the wording in an irrevocable trust specifically states that the assets cannot be paid out until the grantor/creator passes away. An irrevocable funeral trust cannot be dissolved for any reason whatsoever – not even by the person who created it. This is also why funeral trusts receive special tax treatment.

A revocable trust can be created by anyone, and at a later date, can be dissolved by the person who originally created it. Upon dissolution, any assets placed in the trust will revert back to the ownership status they held before they were assigned to the trust.

If you have a funeral trust already set up, any relative, other person, entity or funeral home can handle your arrangements when the time comes.

If you create an irrevocable funeral trust, you may also be able to increase the likelihood of becoming eligible for long-term care benefits available through Medicaid or other social services programs.

If you are funding your trust with life insurance, the trust will have no taxable income to report, since life insurance cash values grow tax deferred.

Almost all states impose a limit on the amount of money that can be placed in a funeral trust. Limits are based on the average cost of a funeral and can range from $5,000 – $15,000 per person. Since trust laws vary by state, get in touch with your local GCB agent for specific details and dollar amounts.

In general, Medicaid considers monthly income, countable assets and asset transfers (approximately 60 months before application) to determine eligibility. Applicants with assets over Medicaid limits are typically denied Medicaid coverage, leaving families to pay the costs for nursing home care and other out-of-pocket care expenses. Purchasing an irrevocable funeral trust can allow an applicant to pay for an expensive item ahead of time and also reduce countable assets to help qualify for Medicaid. An irrevocable funeral trust, because it is a trust and irrevocable, is not counted as an asset by Medicaid. It also does not violate the 60-month asset transfer rule.

Since trust laws vary by state, get in touch with your local GCB agent to see how a funeral trust can benefit you and your family.

No. Funeral Insurance is a popular alternative to a funeral trust. Various types of funeral insurance policies are available from highly rated insurance companies and many offer fixed payment plans. Your GCB agent can answer all of your questions and make recommendations to meet your unique situation.

Yes, funeral trusts are generally exempt from Medicaid spend down and they are not subject to the “year look back” rule.

Yes, most funeral trusts are portable to any funeral home in any of the 50 states.  Policy benefits are paid directly to the funeral home.