When an individual wants to make sure that their final arrangements are covered, they can set up something known as a Qualified Funeral Trust. Final arrangements can be many tens of thousands of dollars, and many don’t want to place this burden on their family. Through a Qualified Funeral Trust, they can prepay for their final needs through a funeral home.
This trust account will pay out once the individual has passed on, so the funeral home itself is not disbursed the funds until they are able to use it. This ensures that the funds in the Qualified Funeral Trust will be held until needed. However, since the individual no longer has control over the funds, they cannot cash these funds out. This also means that the funds in the Qualified Funeral Trust will have its own EIN.
To start a qualified funeral trust, an individual will usually go to a funeral home that already has standing arrangements to create this type of financing. They can then choose how much money they want to invest in their trust, and make their final arrangements with the funeral home. Putting these arrangements on record early is also an excellent way of making sure that their final wishes are followed.