Funeral Trusts: Prepay the Funeral and Protect Medicaid Eligibility
An irrevocable funeral trust sets money aside for your parent's funeral. That money doesn't count toward Medicaid's asset limit, and your family won't have to pay the bill.
Funeral Trusts: Prepay the Funeral and Protect Medicaid Eligibility
An irrevocable funeral trust sets money aside for your parent's funeral. That money doesn't count toward Medicaid's asset limit, and your family won't have to pay the bill.
Funeral Trusts
Explained by Sara
Watch a short walk-through of how a funeral trust works and who it helps most.
Sources: national funeral cost data and state Medicaid rules, 2026.
What Is a Funeral Trust?
A funeral trust holds money set aside to pay for a funeral, burial, or cremation. Once it's irrevocable, it can't be cancelled or cashed out. Because your parent no longer owns that money, it's considered an exempt asset for Medicaid in most states.
Many funeral trusts are funded with a life insurance policy owned by the trust. When your parent dies, the policy pays the funeral costs.
Funeral trust
Burial trust
Irrevocable funeral trust
Funeral expense trust
Who it helps most
• A parent applying for Medicaid who is over the asset limit
• A parent already in a nursing home and spending down
• A married couple where one spouse needs care
• Families who don't want to pay for a funeral out of pocket
How a Funeral Trust Helps Your Parent Qualify for Medicaid
Here's a simple example for a single parent in a state with a $2,000 asset limit.
Without a funeral trust
$14,000
Countable savings
Over the limit by $12,000. Not eligible yet.
With a $12,000 funeral trust
$2,000
Teal: in the funeral trust, not counted. Grey: countable savings.
At the limit. The asset test is met, and the funeral is paid for.
A funeral trust is not a gift, so it doesn't trigger Medicaid's 5-year look-back penalty. Income and medical rules still apply.
How a Funeral Trust Works, Step by Step
Choose an amount
Pick a reasonable amount for the funeral your parent wants. Some states cap how much can go in, and many require an itemized list of goods and services.
Fund the trust
Your parent moves money into the trust, often through a single-premium life insurance policy the trust owns. The trust is irrevocable from that point on.
Keep the paperwork
Give a copy to the family and include it with the Medicaid application as proof the money is set aside for the funeral.
The family uses any funeral home
When your parent dies, the trust pays the funeral home the family chooses. In most states, money left over goes to the state Medicaid program.
What a Funeral Trust Can Pay For
Most funeral, burial, and cremation costs qualify. A few items, like flowers and family travel, depend on your state.
- Funeral director and staff services
- Casket and burial vault
- Headstone or grave marker
- Death certificates and obituary notices
- Use of the funeral home
- Cremation and urn
- Hearse and limousine
- Clothing, hair, and makeup
- Embalming and preparation
- Burial plot and cemetery fees
- Clergy and musicians
- Flowers, in some states
Funeral Trust vs. Pre-Need Contract vs. Burial Fund
All three set money aside for a funeral. They differ in flexibility and how Medicaid treats them.
Funeral Trust Rules by State
About half the states cap how much can go into a funeral trust. Here are the rules for our home states.
Iowa
Up to $13,125 without an itemized goods and services statement. No set limit with one.
Nebraska
Up to $6,924, effective September 1, 2026.
Other states
Limits range from about $1,500 to no limit. Michigan and New York use pre-need contracts instead of funeral trusts.
Source: state Medicaid rules as of September 2026. Limits change, so confirm your state's current amount before funding a trust.
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We had no idea this was even an option. Sara walked us through everything. It was quick, easy, and such a relief.
Mary K., daughter and caregiver
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We thought we had time. I wish I'd known about this sooner. It saved us from spending Mom's last savings.
Kevin, Nebraska
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No lawyers, no funeral home contracts. Just peace of mind.
Mark and Lisa, Iowa
Set Up Your Parent's Funeral Trust With Sara
Sara helps families set up insurance-funded funeral trusts through FuneralTrustGal.com, without a funeral home contract.
Pays the funeral home in 1 to 2 business days, no death certificate required
Works with any funeral home your family chooses
Built to meet Medicaid rules in your state
Can be set up during a Medicaid spend-down
Funeral trusts are funded with life insurance and offered through Sara Guida Agency, LLC, a licensed insurance agency. Availability varies by state.
Sara's book
Leave Love, Not Bills
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How to plan and pay for a funeral ahead of time
The documents every family should have in place
Worksheets to record your wishes and important information
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Plan the Rest of the Journey Too
Members get funeral planning checklists, Medicaid lessons, and a live Q&A with Sara every month.
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Funeral Trust Questions
Is a funeral trust the same as a burial trust?
Yes. Funeral trust, burial trust, irrevocable funeral trust, and funeral expense trust all describe money set aside in a trust to pay for final expenses.
Does a funeral trust count toward the Medicaid asset limit?
No, if it's irrevocable and meets your state's rules. That's why families use it during a Medicaid spend-down.
Is it too late if my parent is already in a nursing home?
No. A funeral trust can be set up during a spend-down or right before a Medicaid application. It isn't a gift, so it doesn't trigger the 5-year look-back penalty.
Can we change or cancel the trust later?
No. An irrevocable funeral trust can't be cancelled or cashed out. That's what keeps it from counting for Medicaid.
What happens to money left over after the funeral?
In most states, the state is named as the beneficiary of any leftover funds to repay Medicaid costs. Setting a realistic amount keeps leftovers small.
Can both parents have a funeral trust?
Yes. Each spouse can have their own trust. Many couples set up two, which lowers their countable assets for both.
Can we buy a funeral trust for other family members?
Some states allow funeral trusts to be purchased for immediate family members, like a spouse, children, siblings, or parents. Rules vary by state, so check before you set one up.
How much should we put in?
Enough to cover the funeral your parent wants, within your state's limit. Price out the funeral first. Many families choose between $10,000 and $15,000 per person.
Do we need an attorney to set one up?
Usually not. Most families set up a funeral trust with a licensed insurance agent or a funeral home. Talk to an elder law attorney if your parent's Medicaid situation is complex.
Is a funeral trust the same as final expense insurance?
No. A final expense policy your parent owns can count toward Medicaid if it has cash value. In a funeral trust, the trust owns the policy, so it doesn't count.
Want to Know if a Funeral Trust Fits Your Parent?
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