There are four reasons why you may want to prepay your funeral:

1. Avoid inflation by locking in today’s prices.
2. Guarantee your burial preferences.
3. Eliminate the financial burden and tough decisions on your loved ones.
4. Provide peace of mind that everything has been taken care of.

One way to prepay for a funeral is to set up a funeral trust. Funeral trusts allow you to set aside money for your future funeral costs. You can establish a funeral trust by depositing money into an interest bearing trust account at your bank. When you die, the trust funds will be disbursed to the funeral home or other service provider that you have designated as the primary beneficiary in the trust agreement. If you enter into the funeral trust directly with the funeral home it may agree to lock in costs for your future services at an agreed upon price. Generally, after the funeral costs have been paid, any amount remaining in the trust will be distributed to your estate.

The trust can be revocable or irrevocable. If the trust is revocable you can change or revoke the trust at any time. However, it will still be part of your taxable estate and counted as a resource for Medicaid purposes. If the trust is irrevocable, it cannot be revoked and the trust proceeds must be used for your funeral. However, it is not counted as a resource for Medicaid purposes. The five year Medicaid look-back period does not apply to Irrevocable Funeral Trusts so it can be funded right before you enter a nursing home.

Another option is to join a funeral society, which will help you find local mortuaries that will deal honestly with your survivors and charge reasonable prices. If you join a society, you will receive a form that allows you to plan for the goods and services you want to get them for a predetermined cost. To find a funeral society near you, you can search the internet at www.funerals.org.

If you have any questions about setting up a Funeral Trust contact Gregory Spadea of Spadea & Associates, LLC at 610-521-0604.