Long-Term Planning: Irrevocable Funeral Trusts

Being alive is not cheap, neither is dying. Funerals can cost up to tens of thousands of dollars, which oftentimes isn’t an amount that’s laying around in the average person’s bank account. That being the case, planning for death with a legal tool known as the Irrevocable Funeral Trust (IFT) can save your loved ones significant financial stress.

Irrevocable funeral trust

What is an Irrevocable Funeral Trust

An IFT is a way to prepay for funeral expenses without jeopardizing your eligibility for government benefits. This is a type of contract that starts with an initial amount invested into the account, with following monthly payments that span out over the course of a few years. If you receive Medicaid, you are eligible to open an IFT for a cheaper price than a revocable funeral trust. Also for Medicaid purposes, if the costs of the funeral is less than $15,000, the funds will be exempt. Since it is irrevocable, once the funds are in the account, you cannot take them out. The trust can be accessed once the grantor passes away; the money is kept in a specific bank that funeral homes work with directly.

What is Included in An IFT

The charges included in this type of trust are funeral home charges, not cemetery charges. That being said, it is possible to have a prepaid plan with a cemetery by purchasing a lot before passing away. In an IFT, the funeral home charges you for various services such as picking up the body of the deceased, transporting and keeping them in a cold location, dressing and casketing the body, working with a licensed funeral director, having an arrangement done and writing up the necessary documents. They also include the actual funeral service itself, as well as a casket that is picked and can include the cemetery grave opening fee. All of this usually does not come at a low rate, which is why it is ideal to pay in smaller increments over the course of time.

When is it Needed?

It may seem that an IFT is only necessary for an elder person who may not be in the best condition, however that is typically not the case. Like most trusts, IFTs are best utilized if paid for when the person is still in good condition and will live much longer than the contract is intended for. The point of this trust is to set money aside for your funeral so that loved ones do not have to take this burden on themselves. If the trust is not paid in full, the person’s next of kin will be responsible for paying the rest of the balance, which is not ideal. On the other hand, if the balance is paid in full and the person continues to live after that, the account will run up interest that will help cover any extra fees or price changes that can occur.

Disadvantages of an IFT

Although there are many benefits to having such a trust account, there are also certain drawbacks that anyone interested in setting one up should be aware of. One downside is that if you relocate to another state, you need to make sure that you let the funeral home know so that they can move your account to another funeral home. This is important to do so that when you pass, your loved ones will not have to deal with this transfer. It is also important to make sure that you have someone in place that can pay for the rest of the charges in the case that you pass before you have paid out your full balance. If the account is not paid in full and no one can cover the costs, the funeral home cannot take responsibility for your body and you will be sent to a city burial, which is a less than optimal situation.

Setting Up An IFT And Meeting With An Attorney

To open up an IFT, you need to meet with a licensed funeral director who can legally present you with a contract as well as guide you through the process. It is also highly recommended to meet with your estate attorney before making such a decision. They can help you decide if this is the best solution for you and will guide you through the waters of creating your trust.