At first, planning for your own funeral can feel a bit awkward, but once you delve in and consider the many benefits, it makes financial sense and can ease some of the difficulties for loved ones in those first days following death. Not only that, but when we pre-plan, we’re better able to ensure our own wishes are met without guilt of burdening a family member with the costs and unanswered questions of whether or not you would prefer one thing over another. And if you’ve not noticed, costs are rising in the burial and funeral industry. Irrevocable funeral trusts make a lot of sense and they’re quite affordable.
Still, it can be a bit confusing as we set about understanding how it all works; the logistics might not make sense at first. Keep reading as we take a look at irrevocable funeral trusts, sometimes referred to as irrevocable burial accounts.
One of the first questions clients ask is how does one know what a funeral will cost in the future? In most states, an irrevocable funeral trust can be funded for up to 125% of current average funeral costs. Insurance policies are also sometimes used.
If you do opt to prepay a funeral, the funeral director is required to deposit the funds into an interest earning account or other approved financial vehicle. He must provide the details of where it’s deposited, the interest it will earn and assurances that proper tax documents will be provided every year.
You won’t be able to withdraw principal or interest. Not only that, but an irrevocable agreement is mandatory in many states if you apply for Medicaid or other government benefits. However, you won’t be penalized if you purchase your plans within the five years leading up to applying for Medicaid, known as the 5 year look back period.
You do, in most instances, have the option of changing funeral homes. This will require written notice to the funeral home along with your preferences for the new funeral home. By law, it has to be transferred within 10 days.
Whatever you ultimately decide, it’s absolutely imperative you let family members know what and where the arrangements are. It can prevent unknowing loved ones from having to pay twice. Also, be sure you let your estate planning attorney know as well so that it can documented in your estate plan and/or will.
Be sure an agreement is provided to you so that there is no miscommunication. You’ll want to memorialize your choices if, say, the casket you initially wanted is no longer available. Finally, be sure and speak with your estate planning lawyer so that you have all of the bases covered. The last thing you want to do is make plans to ease the burden on loved ones only to have them go through it anyway because they were unaware of your previous plans.
- What You Need to Know to Protect Your Special Needs Child - May 30, 2023
- How Tax and Non-Tax Considerations Impact Estate Planning – Part I - May 25, 2023
- The IRS’ Annual Warning: The 2023 Dirty Dozen - May 23, 2023
