The Kiley Law Firm Blog

Consider Funeral Trusts as a Part of Your Estate Planning

If you are 65 or older, blind or disabled, and have the means to set aside some funds, we recommend that you consider setting up a pre-paid funeral trust with a reputable funeral home of your choice.  A funeral trust is an agreement with a funeral home or cemetery who utilizes a pooled income fund to hold assets you set aside to cover future funeral and burial costs.  You can fund the trust with cash, bonds, or life insurance.  The contract allows you to “lock in” future funeral or burial services costs, adjusted to the time when it is expected you will need the trust funds.  It allows you to alleviate any burden on your loved ones to decide upon and fund critical end of life decisions after you have passed, because you will have taken care of all of this already, according to your wishes.    

A funeral trust can be revocable (changed and revoked by the person who sets it up at any time) or irrevocable (generally you can’t get your money out except to pay for funeral services).  Because the funds you set aside go into a pooled income trust, they can accumulate some interest over time.  Another advantage of an irrevocable funeral trust is that it can help one qualify for Medicaid.  As an irrevocable trust, the funds put into it will no longer be deemed in a person’s name and will not create a past asset transfer that violates Medicaid’s “5-year look-back” rule.[1]  An irrevocable funeral trust is still very flexible, however.  An individual (or his/her legally responsible relative following one’s death) may change the choice of funeral home, funeral director, undertaker or cemetery following the execution of a funeral trust, but just may not revoke the agreement entirely.  We also recommend individuals select an independent trustee (other than the funeral home) at the time of setting up a trust to allow for auditing the actual funeral bill for reasonableness and pay any excess to the family, when the time comes. 

Yet another positive about funeral trusts that many people don’t know is that you may also establish a qualifying, irrevocable funeral trust for someone in your “immediate family” and still not create a penalizing asset transfer according to Medicaid eligibility rules.  Immediate family members have been defined to include:  parents, adoptive parents, a spouse, children (minors or adults, including adopted children and stepchildren), and brothers and sisters (including step-siblings and adopted siblings).  The spouse of each of these relatives is also included in this definition, provided the individual is still married to the relative at the time an individual applies for Medicaid.[2]

A few other details about funeral trusts desired to support Medicaid eligibility clarify the legitimate expenses of trust funds as follows:

• Burial space items to include: a casket, urn, mausoleum, vault, headstone, burial containers and headstone engraving, a burial plot or gravesite, the cost of cremation or the opening and closing of a gravesite, and the cost of a perpetual care contract for a gravesite.
• Non-burial space items to include: embalming/cosmetology and burial clothes, funeral transportation (hearse, limousine, out of town shipping), use of funeral home facilities (for services, visitation, or a wake), clergy services, death notices, and flowers.

Items which may not be included in a funeral trust for Medicaid eligibility purposes include: food, lodging or transportation expenses for family, friends or guests.  There is no limit on the cost of the items, but their cost must match the fair market value to qualify.

Kiley, Kiley & Kiley can assist you in your estate planning.  We can help calculate eligibility for Medicaid and suggest ways, like the use of funeral trusts to allocate excess resources, particularly should you wish to legally protect your hard-earned financial nest egg for your family members and retain the option to become Medicaid eligible when the time comes.  Please contact our office to assist you further.

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[1] Kiley, Kiley & Kiley can gladly provide more information regarding resource and asset protection planning to also allow Medicaid eligibility.

[2] See N.Y. Social Services Law Section 141(6) and General Business Law Sect. 453 for the laws on funeral trusts. See also http://www.health.ny.gov/health_care/medicaid/publications/pub2011adm.htm for 11 OHIP/ADM-04-Treatment of Irrevocable Pre-Need Funeral Agreements (July 11, 2011) available at for the NYS Dept. of Health directive implementing and the NYS DOH Medicaid Reference Guide [MRG] section on funeral agreements and burial funds, available at http://www.health.ny.gov/health_care/medicaid/reference/mrg/index.htm.

Believe it or not, in America, more adults have pets than children.  Most people consider their pets as part of their families.  A 2007 survey of the American Animal Hospital Association found that 83 percent of pet owners refer to themselves as their pets “mom” or “dad”.  

So what happens to these pets when their “parents” die or become incapacitated?   The best way for an owner to ensure the continuity of care for their pet is to establish a pet trust.  New York’s Estate Powers and Trusts Law § 7-8.1 allows for such trusts for the care of pets and protects trust funds from being used for anything other than the pet’s benefit.

Many people have traditionally provided for pets in their will.  But this is a flawed plan and can pose many problems.  First, a will is usually not read or produced for days, if not weeks after the owner’s death.  Second, the caretaker named in the will holds only an honorary position.  He/she may abscond with funds intended to care for the pet or leave the animal in a shelter and the courts don’t have the authority to enforce the owner’s instructions.  So, by example, if you write in your will that you leave $10,000 to your niece with instructions that the money is to be used for your beloved beagle Fido, your niece can pocket the money and abandon Fido without the fear of any legal reprisals. 

Courts, however, can enforce the owner’s instructions if they are contained in a pet trust.  Additionally, the terms of a trust can be enforced during the owner’s lifetime, whereas the terms of a will only apply after the owner’s death- significant for the pet of an owner who becomes incapacitated and unable to care for their pet.   An owner who becomes disabled an unable to care for their pet can direct in their trust that the caretaker bring the pet for visits.  The effect a pet can have on people’s physical and mental health is well documented.  Whether its playing a game of catch with a stroke victim or being a calm, familiar face for an owner suffering from the diseases of old age, pets can play an important role in a sick person’s life.

So how does it work?  First, the owner should establish a pet trust. Second, the owner’s will should be written or amended to name the trust and arrange for its funding.  Every pet trust, of course, should name a trustee.  The trustee disburses funds to a named caretaker, who shall carry out the owner’s instructions for the care of the pet.  These instructions can be detailed- from the food the pet prefers, to the park the pets likes to walk, to the owner’s preferred vet or groomer.  A client with more than one pet can direct that the pets live together.   

How much money should be placed in the trust?  This can be tricky.  You’ll want to feel comfortable that your pet is well provided for.  However, if you fund the trust lavishly, you open the door to legal challenges.  Other potential heirs might seek to invalidate the trust claiming that you were not of sound mind.  Therefore, always give good reasons in the trust document for the amount you transfer to a pet trust.  This will substantiate your good judgment and enforce the pet trust in case of a conflict.