Protect Your Assets with an Irrevocable Funeral Expense Trust
The high costs associated with aging represent one of the greatest financial risks Americans face in their later years. Planning for these expenses is essential to ensure the peace of mind that comes with knowing that your financial future is secure after a lifetime of hard work.
This financial risk doesn’t stop with healthcare. While it's uncomfortable to think about, personal funeral arrangements can also be a significant expense—and someone will need to cover those costs. No matter how difficult the path may seem, one key truth remains: final expenses must be addressed during the individual’s lifetime. If they are not, it will fall to the family to cover the funeral costs.
A Funeral Expense Trust is a small, guaranteed-issue life insurance policy that is irrevocably assigned to a trust. Because the funds are probate-exempt, payments can be made quickly. Your Irrevocable Funeral Expense Trust is fully protected from creditors and nursing homes. As an exempt asset, it will not interfere with an individual’s Medicaid or SSI eligibility.
There is no cost in setting up an Irrevocable Funeral Expense Trust when you use an appointed independent agent such as Mary the Medicare Lady.
Irrevocable Funeral Expense Trusts Help with Medicaid eligibility
Funeral trusts can help people who might not otherwise qualify for Medicaid by turning countable assets into noncountable assets. Once assigned it is generally considered an exempt asset by Medicaid and is not subject to the five-year look-back rule. Many states allow Medicaid applicants to purchase funeral trusts for their children and spouses. In Nebraska, as of September 1, 2024, the maximum value of an irrevocable funeral trust is $6,507 per trust, and you can open a funeral trust for yourself, and for immediate family members, including children, spouses, siblings, parents, and stepchildren. The entire amount of the trusts are exempt from Medicaid's asset limit.
Once assigned, this trust is typically considered an exempt asset by Medicaid, meaning it is not subject to the five-year look-back rule.
There are many benefits of a Funeral Expense Trust over prepaying for funeral expenses. One is that you will have the flexibility to move to a different city or state. You’re protected if the funeral home closes or changes ownership. You can feel secure knowing that the funds you’ve set aside are protected from creditors or potential claims, such as those from nursing homes.
Prepaying funeral costs through a Funeral Expense Trust is a straightforward process, offering several benefits. There are no upfront trust fees, and no income tax is due on the funds paid out for funeral expenses. The trust can be set up in a location that is most convenient, eliminating the need to visit funeral homes.
You can designate that the funds be used at any funeral home across the U.S., no matter the location. Funeral trusts can cover a variety of expenses, including caskets, urns, transportation, funeral home services, cremation, embalming, and more. You can instruct the funds to be used for cremation and use the excess funds for travel for family and a Celebration of Life.
There is no underwriting for a funeral trust. Applicants cannot be denied a policy based on their physical condition.
Funeral expenses are not usually tax deductible for individuals, but they may be deductible from the estate's taxes if the trust was funded by an estate.
By utilizing an Irrevocable Funeral trust, you can ensure that your final wishes are met and that expenses are managed with minimal stress and with no financial burdens on loved ones.
Mary Hiatt is a Retirement & Insurance Advisor and President of Mary the Medicare Lady (A non-government entity.) She offers Educational Workshops on Medicare, Drug Savings, and more at no charge. Not connected with or endorsed by the U.S. government or the federal Medicare program. Medicare Supplement insurance plans are not connected with or endorsed by the U.S. government or the federal Medicare program. See www.hiattagency.com or contact licensed independent agent mary [at] hiattagency [dot] com or call or text 402 672 9449 for more information.