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A funeral trust gives testator control and family time to grieve

A trust is one of the most flexible estate planning tools available. Do you want to make sure your dog is taken care of after your death? Do you need to set money aside to support a child with special needs? Do you want to avoid taxes on large bequests to charities? What about making sure your art collection is never broken up, or only displayed in your garage?

And what about setting money aside to pay for your funeral? If you think that funding your funeral before you die is a good idea, you are not alone: 90 percent of Americans agree with you. Only 10 percent have actually followed through.

Many people include their wishes in their wills -- cremation, interment in the family mausoleum -- but they don't give much thought to how the family will pay for it. The assumption seems to be that the money will just come out of the estate.

A funeral trust is another option. By establishing a funeral trust, you can make all the arrangements and special plans you want while ensuring that the family will not be burdened with the bills. You can also specify that any money left over go to a family member, another trust, charity -- anywhere you want.

Estate planners often suggest funding a funeral trust with a life insurance policy. The policy payout goes into the trust at the time of the insured's death. Then the funds are distributed as dictated in the trust documents. The distribution is tax-free, and it is protected from creditors. During your lifetime, any money in a trust is also exempt from Medicare spend downs. The same applies if you fund the trust through an investment account, annuities or any other financial arrangement.

Another big advantage of a funeral trust is that you can appoint anyone to be the trustee. You can appoint someone outside of the family, you can appoint a bank, or you can appoint your three cousins. It is your choice. Once appointed, the trustees have a solemn and legal duty to follow the instructions in the trust and to protect the trust's assets.

Source:, "Funeral trusts: Help clients plan and pay for their funerals while they're alive," Christopher P. Hill, Jan. 13, 2014

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