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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The original proposed regulations provided that the net investment income tax applied to regular trusts, which currently include pooled income funds, cemetery perpetual care funds, qualified funeral trusts, and Alaska native settlement trusts.
Income Tax Return for Qualified Funeral Trusts, will receive six-month, not five-month, extensions.
[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.
Distribution of Fiduciary Income Tax Returns, by Entity Type, Filing Year 2004 Grantor trust 35.5% Complex trust 33.1% Simple trust 20.3% Decendent estate 10.6% Other entities (1) 0.6% (1) Includes bankruptcy estates, split-interest trusts, qualified funeral trusts, qualified disability trusts, and pooled income funds.
A qualified funeral trust is a method of securing payment for funeral and burial services.
301.770-14( b), certain state law trusts, pooled income funds, cemetery perpetual care funds, qualified funeral trusts, etc., as well as tax-exempt trusts, excluding even unrelated business income of those trusts) (Prop.
685(c) (prior to repeal), aggregate contributions to a qualified funeral trust could not exceed $7,000.
Before the limitation was repealed, a qualified funeral trust that had aggregate contributions in excess of $7,000 ceased to be a qualified funeral trust, and its income would be taxed as ordinary income of the grantor of the trust--at a lower individual income tax rate.

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