Irrevocable Funeral Trust

What is an Irrevocable Funeral Trust?

An ‘Irrevocable Funeral Trust’ is a trust you create for your final expenses. It is a single premium life insurance policy that is offered by a select group of insurance companies – placed into your ‘Trust’ for safe-keeping until you pass away. Because the policy itself is owned by your ‘Irrevocable Funeral Trust’, it offers tax-free benefits, protection from inflation, and can be shielded from confiscation by Medicaid or nursing homes.

What are the Advantages of an Irrevocable Funeral Trust:

  1. Peace of Mind – Owners of an Irrevocable Funeral Trust enjoy all of the following benefits
  2. Cannot be confiscated by any nursing home or government sponsored care (Medicaid)
  3. Exempt from Medicaid and Supplemental Security Income (SSI) “spend down” requirements and Estate Taxes
  4. Insulated against inflation
  5. Can be used for additional expenses such as:  a permanent monument in the cemetery, travel expenses for family members to attend your funeral, outstanding debts or obligations, hospital, doctors, legal or attorney’s fees, a repast once the services are concluded and your final expense monies are guaranteed to be there when you need them

What expenses are paid for by an Irrevocable Funeral Trust?

  • Basic Services of Funeral Director & Staff
  • Other Professional Services
  • Embalming
  • Other Care of Deceased
    • Dressing / Cosmetology Casketing
  • Funeral Home Facilities and/or Staff Services
    • Viewing/Visitation
    • Funeral Service
    • Memorial Service
    • Graveside Service
    • Other
  • Other Merchandise
    • Clergy Honorarium
    • Death Certificates
    • Musicians
    • Temporary Marker
    • Stationery Package
    • Obituary Notices
    • Flowers
    • Clothing
    • Open/Close
    • Other
  • CasketCemetery Charges
    • Alternative Container
    • Outer Burial Container
    • Other Services
    • Transportation Equipment & Driver
      • Transfer of Deceased
      • Funeral Vehicle/Hearse
      • Car/Limousine
      • Utility/Service Vehicle
      • Other
  • Cemetery / Burial Plot

Differences between an Irrevocable and a Revocable Trust explained

An ‘Irrevocable Trust’ is a ‘Trust’ that once established cannot be ‘dissolved’ until the terms of the ‘Trust’ are satisfied. In the case of an ‘Irrevocable Funeral Trust’ the person named as the creator [or grantor] of the ‘Trust’ must pass away before the terms and the assets of the ‘Trust’ can be put into motion because the wording in this ‘Trust’ states that the assets can not be paid out UNTIL the creator passes away. It is very important that you realize that an “Irrevocable Funeral Trust’ cannot be dissolved for any reason whatsoever. What these means is that NO PERSON or ENTITY, not even the person in whose name the ‘Trust’ was created, can gain access to the assets placed into the ‘Trust’ – EVER. This is the singular reason why no person or entity can confiscate the assets placed in an ‘Irrevocable Funeral Trust’. This is also the reason why funeral trusts receive special tax treatment.

A ‘Revocable Trust’ is one that can be created by anyone, and at a later date, the ‘Revocable Trust’ can be ‘dissolved’ by the person who originally created it. Upon dissolution, the assets (if any) that were placed into the ‘Trust’ revert back to the ownership status they held before they were assigned to the ‘Trust’. Because a ‘Revocable Trust’ can be dissolved by its creator, or some other person or entity at any time, a ‘Revocable Trust’ DOES NOT enjoy favorable tax treatment or exemption from being confiscated by nursing homes or Medicaid providers or even hospitals, doctors and the like. In the case of seniors seeking care in a nursing home, expecting their care to be paid for by the government, they are now subject to the “spend down” rules imposed by all states before providing free nursing home care.

A solution for your funeral trust

There are a number of choices to resolve your concerns about pre-paying for your final expenses.

 The following are ideas on how to fund a ‘Funeral Trust’ and why it is a better choice for investing the money that you will set aside for your final expenses than other investments.

 Not everyone wants to use cash to fund their funeral trust, consider these great alternatives:

 Redeem your U.S. Savings Bonds

 Most people forget about their savings bonds and don’t have an exit strategy once their savings bonds reach final maturity (when they stop earning interest). Others believe that their Savings Bonds can be used for their final expenses.

However, before you can be admitted into an assisted living facility or Nursing home – expecting the state to pick up the costs for your care – you will be asked if you own any U.S. Savings Bonds – since they are considered by Medicaid to be a ‘countable asset’. You will have to cash-in your savings bonds and ‘spend down’ the proceeds BEFORE expenses for your care will be paid for by the state. This could also involve unnecessary tax implications at a time when you least need more complications.

So, while you are still in full control of your faculties, and before you become ill or incapacitated, why not convert some (or all) of your savings bonds into an ‘Irrevocable Funeral Trust’.


Committing your final expense funds to a specific funeral home is not a wise decision

The Funeral Home where you pre-paid for your final expenses might not be in business anymore – or if it is, the person(s) that you placed your trust and confidence in when you created your final arrangements plan might not be available to carry out your instructions – when you need their services.

The Funeral Home where you pre-paid for your final expenses might be sold or merged into a larger, less personal organization which you might not want handling your final arrangements – and they MIGHT NOT honor your request for a refund.

Your future plans might have you moving to a different city and/or state to retire – or to be near loved ones – thereby making your earlier arrangements obsolete.

With a ‘Funeral Trust’ you are not obligated to have your final arrangements handled by any one specific person or entity – your arrangements can be handled by any relative, other person, entity or funeral home at the time of your passing.

Continuing to hold onto a fully paid-up life insurance policy is not a wise decision

 A fully paid-up policy, with a cash value of more than $1,500.00 is a countable asset and the total amount can be confiscated by Medicaid or a nursing home. Your existing insurance policy can be EXCHANGED – via a process know as a ‘1035 Exchange’ – with no reduction or loss of any benefits or value already earned – into a new policy that will be placed into, and owned by, your ‘Irrevocable Funeral Trust’. This will keep your funds safe from confiscation by any entity (Nursing home, Doctors, Hospitals, etc). Your final expense monies are guaranteed to be there when you need them.

When do you create an Irrevocable Funeral Trust?  

 Because you start the policy, and create the ‘Irrevocable Funeral Trust’ all at the same time, you are required to fund the entire trust at the same time, up front.

How do I fund an Irrevocable Funeral Trust?

  • Write a check for total amount of ‘trust’
  • “old” US Savings Bonds [Learn More About US Savings Bonds](may have tax implications)
  • Expiring CD’s or Treasury Certificates (may have tax implications)
  • Exchange an “old” insurance policy with built-up cash values (may have no tax implications)
  • Tax free withdrawal from most Annuities (up to 10%)


Quiambaug Cove Professional Center

Suite 105

107 Wilcox Road

Stonington CT 06378

PO Box 706

Old Mystic CT 06372

(860) 857-5165


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