Funeral trusts and POD accounts.

If your goal is “set aside $10,000–$15,000 so my family can pay for a funeral without borrowing,” open a POD account at your bank or credit union. Twenty minutes, zero fees, and the money is unconditionally yours until you die. After that, your beneficiary walks in with the death certificate and gets the money.

If you are doing Medicaid spend-down planning — meaning you need to convert assets so they don’t disqualify you from long-term care benefits — an irrevocable funeral trust may be the right vehicle. This is a specialised use case where you should work with an estate planning attorney, not figure it out alone.

You open (or convert) a savings account at any bank or credit union and add a beneficiary using a Payable-on-Death (sometimes called Totten Trust or In-Trust-For) designation. While you are alive, you control the account completely — deposits, withdrawals, closing it, anything. The beneficiary has no claim until you die.

When you die, your beneficiary brings:

• A certified copy of the death certificate
• Their government ID
• Account information (or just your name and the bank can locate it)

The bank releases the funds, typically within a few business days. The account passes outside of probate, which means it doesn’t get tied up for months while a will is being processed.

Pros

• Simplest possible vehicle — no attorney, no insurance agent, no lock-in.
• Free or near-free; depends on the account type.
• You keep full control until death.
• Beneficiary can use the funds however the moment calls for.

Cons

• The funds are still your asset for Medicaid purposes (a major issue for long-term care planning).
• FDIC insurance is per-depositor-per-bank; very large balances need split accounts.
• The beneficiary is named at the bank — if you change your mind, you have to update it there, not in your will.

A funeral trust is a legal arrangement in which assets are set aside specifically to pay for funeral and burial costs. The trust holds the money; a trustee administers it; the beneficiary is your funeral home or your estate, depending on the structure. The trust can be set up in two flavours:

Revocable funeral trust

You can change or cancel it at any time. Useful if you want a more formal vehicle than a POD account but want to retain full control. Practically: most people don’t need this — a POD account does the same thing more simply.

Irrevocable funeral trust

You cannot cancel or modify it. You give up control of the funds in exchange for the assets being treated as exempt for Medicaid spend-down. The funds can only be used for funeral and burial expenses.

State laws cap the amount that qualifies as exempt — typically $10,000 to $15,000, depending on the state. Some states allow more if the entire trust is for “reasonable funeral expenses.”

How preneed compares

A preneed contract with a funeral home (covered in our preneed guide) is a special form of irrevocable funeral trust where the beneficiary is locked to a specific funeral home and a specific funeral plan. Pure funeral trusts let the family pick the funeral home later.

To qualify for Medicaid long-term care, an applicant must have countable assets below a state-specific threshold — typically $2,000 to $3,000 for a single applicant, with a higher allowance for a community spouse. Medicaid “spend-down” planning means converting countable assets into exempt categories so the applicant qualifies.

An irrevocable funeral trust is one of the cleanest exempt categories. Up to the state-allowed limit (commonly $10,000–$15,000), funds placed in an irrevocable trust earmarked for funeral and burial expenses are not counted against Medicaid eligibility. This is the single largest reason families set up funeral trusts.

• Setup time and cost — POD: 20 minutes, free. Funeral trust: 1–2 attorney visits, $300–$1,500 in legal fees.
• Control during your lifetime — POD: full. Revocable trust: full. Irrevocable trust: none.
• Probate — All three pass outside probate.
• Medicaid treatment — POD: counted as your asset. Revocable trust: counted as your asset. Irrevocable trust: exempt up to state cap.
• Use of funds — POD: anything the beneficiary chooses. Revocable trust: per the trust terms. Irrevocable funeral trust: funeral expenses only.
• Best fit — POD: most families. Revocable trust: rare. Irrevocable trust: Medicaid spend-down planning.

Setting up a POD account

1. Go to your bank or credit union (in person or online).
2. Open a savings or money market account, or convert an existing one.
3. Add a Payable-on-Death beneficiary — most banks have a checkbox or short form. You will need the beneficiary’s full name and Social Security number.
4. Fund the account at whatever level makes sense.
5. Tell the beneficiary the account exists, which bank holds it, and where to find the account number.

That’s it. No attorney. No insurance agent. No ongoing fees beyond whatever the account itself charges (often zero).

Setting up a funeral trust

1. Identify the goal — Medicaid planning, larger estate, or both.
2. Engage an elder law or estate planning attorney. National platforms like Trust & Will, LegalZoom, or Rocket Lawyer can handle simpler revocable trusts; Medicaid-driven irrevocable trusts deserve a local attorney who knows your state’s rules.
3. Decide on revocable vs. irrevocable — consequential, mostly irreversible.
4. Fund the trust by transferring assets to it.
5. Notify the family that the trust exists and where the documents are.