As seniors make financial plans for their future, some may want to plan for their end-of-life expenses. This is a simple way to spend down assets when looking to apply for Medicaid benefits, while also alleviating some of the stress and financial obligations that family members and friends face when a loved one passes away. But how do prepaid funeral plans differ from funeral expense trusts?
What is a Prepaid Funeral Plan?
A prepaid funeral plan allows aging adults to lay out their funeral plans and set aside funds in the form of a contract with a funeral home. Funeral homes offer different packages to choose from, which typically include a funeral, burial, or cremation. In most cases, additional costs, such as a burial plot, headstone, and obituary, must be covered separately. With a prepaid funeral plan, risks include the funeral home going out of business or mishandling the funds. This option also limits the individual to the chosen funeral home and cannot be transferred.
What is a Funeral Expense Trust?
A safer option for setting aside funeral expenses is funding an irrevocable funeral expense trust. Similar to a prepaid funeral plan, this allows seniors to set aside funds for end-of-life expenses through an irrevocable trust. Individuals are not required to commit to one particular funeral home. Instead, that choice can be made when necessary. With a funeral expense trust, the individual can choose whether or not to set specific plans. In some states, however, a list of goods and services is required if seeking Medicaid eligibility. Irrevocable funeral expense trusts cannot be altered and are considered exempt for Medicaid purposes as long as the value is below a state-specific limit. Learn about our irrevocable funeral expense trust product.
If you have a client who is planning for their future or looking to spend down assets for Medicaid, an irrevocable funeral expense trust is a simple way to take care of those end-of-life expenses. Get in touch with our team at The Krause Agency to learn more or request a quote to get started.