Understanding Funeral Trusts

Cremations are among the cremation services offered in Sun City, AZ, and some people preplan their cremations and memorial services, as well as setting up funeral trusts to pay their funeral expenses.

Regardless of whether you choose cremation services or a burial, you have the option of covering them up front with the funeral home, by making pre-arrangements to set up a funeral trust as a way to set aside this money so that it is there when your family needs it.

A funeral trust is separate from what is known as a Payable on Death (POD) account, which is set up with a bank and is independent of a funeral contract. Instead, a funeral trust lets you set aside money in anticipation of the costs of your funeral, cremation services, or burial. As with any trust, they are subject to certain rules established by the Internal Revenue Service, which govern the circumstances by which the trust arose and the means by which contributions to it can be made.

Funeral trusts can be set up with the help of the funeral home or cremation service with whom you are entering the contract. You can then choose to fund the trust through a variety of mechanisms, such as certain deposits, bonds, or life insurance. Upon your death, the trust funds are disbursed to the primary beneficiary, which is the funeral home or cremation service that you have designated. Certain funeral homes or cremation services may also participate in what is known as a master trust program, in which money is pooled and invested into relatively safe investments. As with individual trusts, however, the funeral home or cremation service can assist you in setting this up. Regardless of whether the trust is individual or part of a master trust program, however, there are several things you will want to consider before setting it up.

First, make sure you understand what happens to any remaining funds in the trust once all expenses are covered, as well as what happens in the event that the funds available are not enough. Your pre-need contract should spell this out for both situations, the ramifications of which revolve around whether or not the price is guaranteed. For example, if the price is guaranteed, and there are funds remaining after the costs of the funeral are met, the funds will likely remain with the funeral provider. If the price is not guaranteed in the contract, any excess will likely return to the estate. If there are not enough funds to cover expenses, however, the heirs to the estate can be held liable for the balance.

There are many additional factors you will want to consider as well, such as whether the trust is revocable, or whether it impacts any benefits collected through other programs. These are all issues which can be addressed by established and respected cremation services professionals. Keep in mind, however, that there will always be unscrupulous individuals who are looking for ways to take advantage of your good faith. As with all matters concerning finances, it is important to do careful research and acquire recommendations from businesspeople you trust.

For more information about funeral trusts and cremation services provided in Sun City, AZ, our compassionate and experienced team at Simply Cremation & Funeral Arrangements is here to help. You can come to our funeral home at 16952 W. Bell Rd., #303, Surprise, AZ, 85374, or you can contact us today at (623) 975-9393.