A qualified funeral trust (QFT) is a type of trust that is used to pay for funeral and burial expenses. It allows people to pre-plan and set aside money to pay for these end-of-life costs without worrying whether long-term care costs will go through all their assets before they are eligible for Medicaid.
A QFT is used to hold funds to pay for the grantor’s burial and funeral under a contract with a business that will provide these services. In addition to protecting these funds, a QFT allows the trust funder to lock in their end-of-life expenses at today’s costs.
Why should I plan for funeral arrangements in advance?
Planning for your burial and funeral expenses in advance ensures that your wishes are carried out, the funds to cover these services are set aside, and your family is spared the expenses and stresses of planning your burial and funeral.
By planning in advance, you could:
- Compare prices
- Make informed decisions about what kind of funeral and burial you would like
- Discuss your preferences with your family
- Lock in prices at today’s costs
- Reduce future stress on your loved ones
What are the requirements to qualify for Medicaid for long-term care?
The requirements to qualify for Medicaid for long-term care may vary by state and by Medicaid programs, but generally include the following:
- An income below a certain limit: A single individual, age 65 years or older, must have an income of less than $2,742 per month to qualify for Medicaid eligibility for long-term care.
- For married couples, the non-applicant spouse can have a maximum income of $3,715.30 per month. If both spouses are applying, the maximum combined income is $5,484 per month.
- Asset limits: The asset requirements can be complicated and comprise countable and exempt assets. A single applicant, age 65 and older, is permitted a maximum of $2,000 in countable assets. Married couples can have a maximum of $4,000. There are state-specific exemptions, notably in New York and California.
- Home equity: Medicaid also considers an applicant’s home equity. The exempted amount varies by state. In some states, the applicant’s primary residence is exempt.
- Level of care: Eligibility of care is determined by the type of assistance the applicant requires. This is determined in part by a medical assessment.
Each state has its own requirements for Medicaid-funded long-term care. Anyone considering applying for Medicaid long-term care services should talk to a Medicaid advisor to learn more about requirements in their state.
How do you set up a funeral trust?
If you have decided to prepay for your funeral and burial expenses by setting up a funeral trust, the first step is to talk to your estate attorney.
A funeral trust is an inter vivos trust created by the grantor or settlor to prepay for burial and funeral expenses. Laws governing funeral trusts vary by state.
A funeral trust is a legal agreement between the grantor (person who establishes the trust for themselves), the trustee (a bank, trust company, or funeral home that manages the trust), and the beneficiary (the funeral home).
The trust can cover:
- Funeral home services
- Obituary notices
- Death certificates
- Travel expenses for out-of-town relatives
- Memorial following the funeral
The trustee will commit to the funeral trust contract to fund your funeral and burial using secured interest-bearing, government-backed trust accounts at a predetermined price when establishing the trust.
Are there any disadvantages to a funeral trust?
A funeral trust allows people to prepay for their funeral and save their loved ones from the financial burden and stress of planning a burial and funeral without knowing what their loved ones may have wanted.
However, there are some potential drawbacks to consider, such as:
- Potential for abuse: There is the possibility that an unscrupulous funeral home director may take advantage of your pre-planning. If you purchase your funeral trust from a private funeral home, it could go out of business before you can use it.
- Need for an independent trustee: It is important to have an independent trustee who can ensure the funeral bill is reasonable and there is no mismanagement of funeral funds.
- Limitations: There are limitations on how the funeral funds are spent, which could be a problem if your family wants to deviate in some way from the pre-planned arrangements.
- No refunds: Funeral trusts are irrevocable, so the money must be used for its intended purpose.
Set up your funeral trust with a company that allows you to use any funeral home. A revocable funeral trust protects these set-aside funds from creditors and allows your loved ones to pay your funeral and burial costs without waiting for probate.
If you want to pre-plan your funeral and burial to save your loved ones from these tasks and would like to use a funeral trust, schedule a call with us at 855.631.3457 to learn more about how to protect those most important to you.