How to Make a Burial Policy Irrevocable
A burial policy becomes irrevocable when it is created for the sole purpose of paying burial expenses. The advantage of an irrevocable policy is that up to $1,500 invested in it is not counted as assets and so is not taxable. A further benefit of the Burial Fund Exclusion (BFE) or Qualified Funeral Trust (QFT) is that any increased value in the policy, as well as any interest earned on it, is also excluded from designation as assets.
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Instructions
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Designate $1,500 to be placed in a burial fund that qualifies for Burial Fund Exclusion (BFE) and so is tax free. Your spouse may also designate $1,500 for burial.
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Select as your burial fund an irrevocable financial instrument (which must not be combined with other assets), such as a Qualified Funeral Trust (QFT), a cash account or a burial insurance policy with a clear cash value that is reserved for burial expenses.
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Check your Social Security benefits to see if you were eligible for burial funds as of July 11, 1990. If you were, and if you have had burial funds excluded that don't meet current requirements for exclusion, you must convert that financial instrument to meet current requirements (unless there is an intractable impediment).
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Tips & Warnings
Consult a lawyer, investment adviser or insurance agent who is well versed in federal regulations and state laws that apply to making a burial policy irrevocable.
Consider an irrevocable burial trust for your eligible child, where appropriate, if you and your spouse are ineligible for an irrevocable burial policy.
Be aware that if the cash surrender value of an insurance policy you own on yourself or your spouse has been excluded from resources, your irrevocable burial policy's tax-free status may be reduced by that amount.
You also may want to check with your tax accountant about the implications of an irrevocable (tax-free) burial policy.
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Resources
- Photo Credit cemetary 3 image by sonya etchison from Fotolia.com
