What Is a Funeral Trust? How It Works and What It Covers
A funeral trust is money you set aside today to pay for your funeral later. The money sits in a trust until it is needed, then pays for the funeral you planned. Families use a funeral trust to spare loved ones the bill, lock in their wishes, and protect savings from a nursing home spend down. This page explains how a funeral trust works, what it covers, and what happens to any money left over.
Funeral Trust Definition
A funeral trust is a legal arrangement that holds money for one purpose: paying for your funeral. You fund the trust now. When you pass, the money goes to the funeral home to cover the costs.
Most families choose an irrevocable funeral trust. Irrevocable means you cannot cancel it or take the money back. That is what makes it useful for Medicaid planning, because Medicaid does not count money you cannot reach, up to your state's limit.
How a Funeral Trust Works
1
You fund the trust
You set aside an amount that matches what your funeral will cost.
2
The trust holds a whole life policy
With the trusts I offer, your money goes into a whole life insurance policy that the trust owns.
3
The money waits
The policy stays in the trust for as long as you live. You cannot cash it out, and no one else can either.
4
The funeral is paid
When you pass, the funeral home is paid from the trust. Your family does not wait on probate to access the money.
Irrevocable vs. Revocable Funeral Trusts
Irrevocable
An irrevocable funeral trust is locked in. Medicaid does not count it, up to your state's limit.
Revocable
A revocable funeral trust can be canceled, and you can get the money back. Because you can reach it, Medicaid counts it as an asset.
If Medicaid could be in your future, the irrevocable choice protects more of your savings. See the full trust comparison.
What a Funeral Trust Covers
A funeral trust can pay for the goods and services a funeral home provides, including:
Funeral home staff and services.
The viewing, visitation, and funeral service.
The casket or urn.
Embalming or cremation.
Transportation, including the hearse.
Burial costs such as the vault, opening and closing of the grave, and the headstone.
We use a funeral home price list to match the trust amount to these costs. If you want a burial, see how a burial trust works.
Funeral Trust Account vs. Funeral Trust Fund
You may see the terms funeral trust account and funeral trust fund. Both describe where prepaid funeral money is held. Some are bank accounts. Some are funds a funeral home manages.
Before you pay, ask two questions. Is it irrevocable? Is it portable? A revocable account still counts for Medicaid. A plan tied to one funeral home may not follow you if you move. The trusts I offer are irrevocable and portable.
What Happens to Money Left Over in a Funeral Trust?
Sometimes the funeral costs less than the trust holds. With the trusts I offer, the money left over after the funeral is paid goes to your estate.
If Medicaid paid for your care, your state may claim leftover money through estate recovery. That is one more reason to match the trust to the real cost of your funeral.
What If the Funeral Costs More Than the Trust?
Funeral prices rise over time. The policy inside the trust can grow, which helps cover higher costs later. If the funeral still costs more than the trust pays, your family pays the difference.
Benefits of a Funeral Trust
No health questions. Everyone qualifies, even in a nursing home.
Medicaid does not count an irrevocable trust, up to your state's limit.
Your plan is portable and moves with you to another state.
Your family avoids probate delays for funeral costs.
Your family does not make costly decisions in the hardest week of their lives.
Is a Funeral Trust Right for You?
A funeral trust fits best if a parent may need nursing home care, if your family is in a Medicaid spend down, or if you want your funeral paid and planned so your children do not carry it. Learn how Medicaid treats a funeral trust. I offer funeral trusts in every state except Michigan and New York.
Funeral Trust FAQs
What is a funeral trust?
Money set aside in a trust to pay for your funeral. When you pass, the trust pays the funeral home.
Is a funeral trust the same as prepaid funeral insurance?
They are related. The trusts I offer hold a whole life insurance policy owned by the trust. The trust is what makes it irrevocable and protected for Medicaid.
What happens to the money left over in a funeral trust?
With the trusts I offer, leftover money goes to your estate. If Medicaid paid for your care, your state may claim it through estate recovery.
Can I cancel a funeral trust?
Not if it is irrevocable. That is why Medicaid does not count it.
Can I use my funeral trust at any funeral home?
Yes. The trusts I offer are portable, so you can use any funeral home, even if you move.
Start Your Funeral Trust Today
One call shows you what a funeral costs where you live, your state's limit, and how much a trust can protect. 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.