How Irrevocable Funeral Trust Funds Work

26 August 2015
 Categories: Relationships & Family, Blog


Quickly raising the money for a funeral can cause a financial hardship for many families. However, with some careful planning and foresight, you can make arrangements to pay for your funeral ahead of time. Irrevocable funeral trust funds allow you to set aside money months and years before you pass away to pay for the type of funeral you desire. Here is how you can set up an irrevocable trust fund to pay for your funeral costs.

Irrevocable Trust Funds

An "irrevocable" trust fund means that once you place the funds in the trust the funds cannot later be withdrawn by you or the funeral home for any other purpose besides paying for your funeral. The funds can only be accessed after you have been buried and the bill is due. If your funeral expenses end up costing less than the amount in the irrevocable trust fund, the excess amounts goes to your heirs or beneficiaries.

Choose a Funeral Home

You will work with a local funeral home, such as Fluehr Funeral Home, to set up the trust fund. They will help you plan and determine the costs of your funeral. You want to make sure you choose a reputable funeral home that you expect to be around at the time you pass away. They will have the paperwork you need to set up an irrevocable funeral trust fund.

Payment Plans

You have two choices when funding a funeral trust fund: you can either pay the whole amount in one lump sum, or you can make monthly payment arrangements until the trust is fully funded.

  • Lump Sum Payment. You use existing money to pay for your funeral expenses at today's prices. If you pass away twenty years from now, your funeral expenses are covered regardless of inflation rates or increases in funeral costs.
  • Monthly Payments. If you don't have the money to make a lump sum payment, you can make payment arrangements to fund the irrevocable trust over a couple of years. This allows you to budget for your final expenses without limiting your ability to meet your monthly living expenses.

Money is Protected

The money in the irrevocable trust fund is protected from creditors, nursing homes, and Medicare (protection from Medicare is subject to limitations in the amount in the trust fund – contact Medicare for current data on what those financial limitations are currently, or ask your funeral director at the time you set up the trust fund). This means you'll have the type of funeral you wanted regardless of whatever else happens in your life.

Financial Institution

The funds are placed in a special irrevocable trust fund account in a financial institution where the money will earn interest until it is taken out at the time of your death. The interest earned on the money is deposited into the account and cannot be touched. The interest earned on the account offsets the increase in future costs for the funeral you planned ahead of time.