Funeral Trust Comparison: Revocable vs. Irrevocable and Your Other Options
There is more than one way to pay for a funeral ahead of time. A revocable funeral trust, an irrevocable funeral trust, a funeral home plan, life insurance, and a savings account all work differently. The biggest difference is how Medicaid treats each one. This page compares your options side by side so you can choose the right fit.
Revocable vs. Irrevocable Funeral Trust
Revocable funeral trust
You can cancel it and get your money back. Because you can reach the money, Medicaid counts it as an asset. It fits people who want flexibility and do not expect to need Medicaid.
Irrevocable funeral trust
You cannot cancel it or cash it out. The money can only pay for your funeral. Because you cannot reach it, Medicaid does not count it, up to your state's limit. It fits anyone who may need nursing home care.
If Medicaid could be in your future, the irrevocable trust protects more of your savings.
Your Options at a Glance
Irrevocable funeral trust
Can you cancel it? No.
Does Medicaid count it? No, up to your state's limit.
Health questions? None with the trusts I offer.
Is the money locked for the funeral? Yes.
Revocable funeral trust
Can you cancel it? Yes.
Does Medicaid count it? Yes.
Is the money locked for the funeral? No.
Funeral home prepaid plan
Can you cancel it? Depends on the plan.
Does Medicaid count it? Only if it is revocable.
Can you move it? Often tied to one funeral home.
Final expense life insurance
Can you cancel it? Yes, and it may have a cash value.
Does Medicaid count it? In Iowa and Nebraska, policies over $1,500 in face value can count.
Is the money locked for the funeral? No. The beneficiary can spend it on anything.
Savings account for burial
Can you cancel it? Yes.
Does Medicaid count it? Yes, except up to $1,500 set aside for burial.
Is the money locked for the funeral? No.
Funeral Trust vs. Life Insurance
Life insurance pays a beneficiary, who can use the money for anything. A funeral trust pays for the funeral. Many families like knowing the money cannot go to another bill.
For Medicaid, the difference is bigger. In Iowa and Nebraska, life insurance with a face value over $1,500 can count as an asset. An irrevocable funeral trust does not count, up to your state's limit.
With the trusts I offer, the trust owns a whole life policy. You get the strength of insurance with the Medicaid protection of an irrevocable trust.
Funeral Trust vs. Funeral Home Prepaid Plan
Many funeral homes sell their own prepaid plans. Some are revocable, which means Medicaid counts them. Some are tied to that one funeral home, which is a problem if you move.
Ask any funeral home two questions before you pay. Is it irrevocable? Is it portable? The trusts I offer are both. Learn more on the prepaid funeral trust page.
Funeral Trust vs. a Savings Account
A savings account labeled for burial is easy to set up. It is also easy for Medicaid to count. Only $1,500 set aside for burial is excluded in Iowa. The rest counts toward the asset limit and must be spent down.
Moving that money into an irrevocable funeral trust protects it, up to your state's limit.
Three Types of Trusts Families Ask About
People often mix up these three. Here is the difference in plain terms.
Funeral trust
Sets aside money for funeral and final expenses. This is what I offer on this site.
Estate planning trust
Combines funeral funding with more estate and beneficiary planning features. It does more than adding a payable on death or transfer on death name to an account.
Traditional living trust
What most people picture when they hear the word trust. It is usually a revocable living trust created as part of an estate plan. It can hold a home, bank accounts, and investments and give instructions for how they are managed and passed on. Because it is revocable, Medicaid counts what is inside it.
Which Option Fits You?
If a parent may need nursing home care, choose an irrevocable funeral trust. If you want flexibility and do not expect Medicaid, a revocable plan or life insurance may work. If you want help sorting it out, book a call and we will compare your options using your real numbers.
Funeral Trust Comparison FAQs
What is the difference between a revocable and irrevocable funeral trust?
You can cancel a revocable funeral trust, so Medicaid counts it. You cannot cancel an irrevocable funeral trust, so Medicaid does not count it, up to your state's limit.
Is a funeral trust better than life insurance?
For Medicaid planning, usually yes. In Iowa and Nebraska, life insurance over $1,500 in face value can count. An irrevocable funeral trust does not.
Does a revocable funeral trust count for Medicaid?
Yes. Medicaid counts it because you can cancel it and take the money back.
Can I change a revocable funeral trust to irrevocable?
In many cases, yes. In Iowa, changing a revocable contract to irrevocable can clear a transfer penalty as of the first of the next month.
Does a living trust protect assets from Medicaid?
No. A traditional living trust is usually revocable, so Medicaid counts the assets inside it.
Compare Your Options on a Free Call
One call shows you how each option works with your savings, your state's limit, and your Medicaid timeline. There is no cost and no obligation.
Funeral Trust Gal is part of the Aging Parent Resource Center.
Sara Guida is a licensed insurance agent, not an attorney, and does not represent any state Medicaid agency. Content on this site is general education, not legal or financial advice. Medicaid rules and funeral trust limits vary by state.