What’s the Difference? Which One Is Best for You?
When a loved one passes, the grieving process can make it difficult to focus on the details of planning a funeral, particularly in the Jewish tradition, where burial typically takes place within 24 hours. One of the greatest gifts you can leave your loved ones is a fully funded and planned funeral, so that they can work through their grief without unnecessary concerns about how to pay for a funeral or what it should look like. That’s where a funeral trust comes in.
What Is a Funeral Trust?
A funeral trust is essentially a contract between an individual and a funeral/burial service provider. Typically, the funeral trust identifies the costs associated with a funeral and/or burial, and may or may not lock in the prices at the time the trust is executed.
Like other types of trusts, the funeral trust creates a separate legal entity with the power and authority to hold property (typically monetary funds). The trust commonly identifies the rights and responsibilities of all parties—the individual, the funeral home and the cemetery—and can set forth the details of any funeral service or burial. It’s also generally designated as a revocable or irrevocable funeral trust.
What Is a Revocable Funeral Trust?
With a revocable funeral trust, the person establishing the trust (the individual, or “trustor”) retains control of all money placed into the trust, as well as the terms of the trust, and can withdraw funds, change the provisions of the trust, or revoke the trust at any time. While the revocable trust does give the trustor a greater degree of freedom to fund or adapt the trust, it can also have some potential drawbacks. Most specifically, the funds placed into any type of revocable trust are typically still considered the property of the trustor, and will typically be included in any determination of Medicaid eligibility. Accordingly, if qualifying for Medicaid is an important consideration, you don’t want your funeral trust to be revocable.
What Is an Irrevocable Trust?
Conversely, an irrevocable trust may not be amended in any way by the trustor once it has been executed. Upon creation of the trust, the ownership of all assets is conveyed to the trust and the trustee (often a funeral home or cemetery, but occasionally a bank or trust company) has all powers to manage the assets in the trust. Unlike assets in a revocable funeral trust, the funds placed in an irrevocable trust will not affect your eligibility for Medicaid benefits. If you want or need Medicaid benefits for any reason, you should create an irrevocable funeral trust.
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