Qualified Funeral Trust

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Qualified Funeral Trust

A trust constituted exclusively to pay for the funeral expenses of beneficiaries. In order to qualify for favorable tax treatment by the IRS, contributions made to the trust may not exceed certain limits per beneficiary and the trust must be the result of a contract with a funeral director or the equivalent.
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Pooled income funds and qualified funeral trusts (taxable under Sec.
Income Tax Return for Qualified Funeral Trusts, will receive six-month, not five-month, extensions.
The trustee may file an aggregate Form 1041-QFT for all qualified funeral trusts under his or her control [27].
26] Qualified funeral trusts may file Form 1041-QFT only if they have applied for and received QFT status.
27] The number of qualified funeral trusts included on a single return is entered on line 4 of Part I of Form 1041-QFT.
6% (1) Includes bankruptcy estates, split-interest trusts, qualified funeral trusts, qualified disability trusts, and pooled income funds.
770-14( b), certain state law trusts, pooled income funds, cemetery perpetual care funds, qualified funeral trusts, etc.
Because the limitation has been removed, qualified funeral trusts will no longer be disqualified for excess contributions and will be able to hold more funds; therefore they should have more income, and all the income will be taxed at estate and trust tax rates.
685(c) (prior to repeal), aggregate contributions to a qualified funeral trust could not exceed $7,000.

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