Do I have to pay taxes on a mortuary irrevocable trust if my only income is social security?

Estate Planning, Social Security, Taxes
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August 2017

If this is for a funeral or "mortuary" pre-payment plan you purchased, the answer would be yes.  However, in my experience the income you receive should not be very material and would have a minimal effect on your taxes...especially if your only income is Social Security.  It should also NOT be enough to push your Adjusted Gross Income higher to the point where your Social Security would be Subject to Taxes.

For those not aware of what a "Mortuary Irrevocable Trust" is, they are funeral trusts that allow people to pay funeral expenses in advance, and that can spare your survivors a lot of difficult decisions while grieving. I have even seen some nursing homes even require a funeral trust as a condition of admission. But if the trustees aren’t reputable (beware high pressure salesmen) or the information isn’t current, these trusts can bring bereaved families more grief.

The Internal Revenue Service defines a funeral trust as “a ‘pooled income fund’ set up by a funeral home or cemetery to which a person transfers property to cover future funeral and burial costs.” They’re often referred to as “pre-need programs.”

August 2017