What is a funeral trust?

A funeral trust is primarily a financial arrangement specifically designed for pre-paying funeral expenses. This type of trust allows individuals to set aside funds, typically in a trust account, that can be used for funeral services at the time of need. By doing so, individuals can lock in current prices for funeral services, alleviating potential financial burdens on loved ones and ensuring that their wishes regarding the type of funeral are honored.

Establishing a funeral trust provides not only peace of mind concerning future expenses but also allows for the potential growth of the funds in a trust account through interest or investment returns. This growth can help to keep pace with inflation, which can be advantageous as funeral costs are subject to change over time.

The other options represent different facets of funeral planning but do not capture the entirety of what a funeral trust encompasses. An insurance policy that covers burial costs typically focuses on providing a death benefit rather than specifically pre-funding funeral expenses. A legal document outlining funeral service preferences refers to the individual's wishes about their funeral but does not involve financial planning. A community fund to assist with funeral expenses might address financial help within a community context but does not reflect an individual’s direct financial commitment to their own funeral costs.