A funeral trust is a legal document that records the death of an individual. The paper also includes information about the funeral arrangements. The life insurance policy is the most significant liability on the estate after the death of the policyholder. The trust is used to create a living trust used to pay the life insurance policy’s premium. Therefore, funeral trusts are made before death and cover the final expenses on the Life Insurance Policy.

Before death, a funeral home undertaker prepares the final items required for the funeral. This typically includes the basic casket, headstone, cremation container, burial space, hearse, and more. Then, within ten days of a death, the funeral director forwards the assets to a funeral trust program (or PrePlanSM), typically a bank account or a certificate of deposit. Within thirty days of the death, the purchaser is expected to receive a check in the mail confirming where the deceased’s money is held. The cash value of the account is the amount the insured person would have paid into the life insurance policy at the time of death. If a refund policy was issued and applied to the account, then the cash value of the account will be equal to the sum of the premiums paid minus the amount of the refund.

As time passes, many people become financially stressed and experience a variety of emotions. In many cases, these emotions cause people to squander money that would otherwise be available for the funeral service and the survivors. In addition to the emotional stress caused by the death of a loved one, families may become concerned about the possibility of not having enough money to pay their bills and other expenses. The death of an insured person also usually changes the credit status and credit history of family members, which can also affect the availability of funds for the funeral service and burial costs.

In short, it’s extremely important that you have a funeral trust set aside specifically for your beneficiary. It does no good for the funeral home to have an account and not have funds available for distribution to the family. The funeral director should not only have a separate account but he/she should ensure that any monies received are disbursed to the beneficiaries promptly. Additionally, once the account is opened, it must remain that way. Family members who start using the account will not be allowed to withdraw from it will be considered null and void.

Another requirement of the Funeral Trust Program is that the funeral director to disclose any financial need you may have. As long as the funeral director is honest, this will satisfy the regulatory agency. For example, if the purchaser has applied for a loan and the loan was denied, the purchaser shall state this information on the application. The terms and conditions will vary depending on the financial institution that issued the loan. A preneed funeral program should detail any requirements, the buyer must meet in order to be considered for a renewed funding option.

One area that is often overlooked is the interest earned by the preneed account. Although most financial institutions will not permit a beneficiary to access funds based solely on interest earned, some banks and credit unions do allow it. Most likely, the funeral home will charge a reasonable interest rate and most likely the buyer will be expected to repay the loan at the time of the funeral service. Again, this will vary by institution. If the preneed funding does not cover all expected expenses, the buyer may still owe back some funds to the funeral home. However, if the buyer can pay the balance within a reasonable period of time, then there should be no issue.

When the Funeral Trust Program is being prepared for a client’s purchase from a rented facility, it’s very important to consult with a certified public accountant (CPA). Since the purchaser will be responsible for making payment arrangements, he or she must understand how much money will need to be set aside in trust for payment of funeral expenses. In many cases, people fail to plan for this situation and end up with a large bill that they are unable to pay. By having a qualified professional involved in the process, many people are able to avoid this common mistake.

Another common mistake made by many people is to set aside money for the funeral service. They assume that because the cost is so expensive, they will be able to buy everything they need on their own. Although it is possible to save money when dealing directly with the funeral home, it’s not recommended. By using a prepaid funeral program, a client can make sure that money for funeral expenses won’t run out before the actual services. Even better, if the prepaid funeral program is attached to the real estate contract, most buyers will already have enough money set aside for the transaction.