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The newsletter articles on this page provide valuable information on timely and interesting financial issues across a variety of subject areas, including retirement, investments, personal finance, annuities, insurance, taxes, college, and government benefits.


Four Numbers You Need to Know Now
Student Loan Debt: It Isn't Just for Millennials
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What is a funeral trust?
What is a pet trust?


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What is a funeral trust?

A funeral trust is an arrangement entered into with a provider of funeral or burial services. Prepaying funeral expenses may allow you to "lock in" costs for future funeral or burial services at an agreed-upon price. The funeral home sometimes serves as trustee (manager of trust assets), and you usually fund the trust with cash, bonds, or life insurance. A revocable funeral trust can be changed and revoked by you at any time. An irrevocable trust can't be changed or revoked, and you generally can't get your money out except to pay for funeral services.

Irrevocable funeral trusts may also help you qualify for long-term care benefits through Medicaid. For example, these trusts may be funded with assets that would otherwise be countable resources for Medicaid (i.e., included in determining Medicaid eligibility). They are often sold through insurance companies, in which case they are typically funded with life insurance. And you can fund the funeral trust right before entering the nursing home — there's no "look-back" period for these transfers, unlike the case with certain other transfers that can cause a delay in the start of Medicaid benefits.

Another advantage of funding your trust with life insurance is that the trust will have no taxable income to report, because life insurance cash values grow tax deferred. Otherwise, income from trust assets may be taxed to you as the grantor of the trust, unless the trustee elects to treat the trust as a qualified funeral trust by filing Form 1041-QFT with the IRS, in which case trust income is taxed to the trust.

But what happens if you want to change funeral homes, or the facility you selected goes out of business? Does your irrevocable trust allow you to change beneficiaries (e.g., funeral homes)? Are trust funds protected from creditors of the funeral home? State laws regulating prepaid funeral trusts often require funeral homes to keep trust assets separate from their own business assets, keeping them safe from funeral home creditors. And most irrevocable trusts are transferable to another funeral home should the initial business fail or you change funeral homes.

There are expenses associated with the creation of a trust and the purchase of life insurance, and benefits are not guaranteed.

 
©2017 Broadridge Investor Communication Solutions, Inc. All rights reserved.


 
 
 The advisors of Wood Financial are Registered Representatives of and offer securities, insurance and advisory services through Royal Alliance Associates, Inc. member FINRA/SIPC. Wood Financial is not affiliated with Royal Alliance Associates, Inc. or registered as a broker-dealer or investment advisor.

IMPORTANT CONSUMER INFORMATION:  A broker-dealer, investment adviser, BD agent, or IA rep may only transact business in a state if first registered, or is excluded or exempt from state broker-dealer, investment adviser, BD agent or IA rep registration requirements, as appropriate. Follow-up, individualized responses to persons in a state by such a firm or individual that involve either effecting or attempting to effect transactions in securities, or the rendering of personalized investment advice for compensation, will not be made without first complying with appropriate registration requirement, or an applicable exemption or exclusion.

For information concerning the licensing status or disciplinary history of broker-dealer, investment adviser, BD agent, or IA rep, a consumer should contact his or her state securities law administrator.



This communication is strictly intended for individuals residing in the state(s) of AL, CO, IN, KS, MT, NM, OK, TX and WY. No offers may be made or accepted from any resident outside the specific states referenced.
 


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