A qualified funeral trust is a special type of trust account meant to pay for an individual’s funeral expenses. An individual can create an arrangement with a funeral home in advance, so that the funeral home has the money for their final expenses, but these funds are expressly held aside. Otherwise, it would be too easy for funds to be co-mingled and potentially unavailable once the individual’s final expenses are needed.
To start a qualified funeral trust, the individual will approach a funeral home. Not all funeral homes offer this type of payment, but it can be an easy way to ensure that the funds don’t have to come from family. The qualified funeral trust funds will no longer belong to the person who paid for the funeral home’s services once in the fund, but do need to be spent on the relevant expenses. Consequently, the funds are held under a separate entity, and under a separate EIN/ITIN.