What is a 'preneed trust'?

• A. A loan from a bank to cover funeral expenses.
• B. A government grant for funeral expenses.
• C. A preneed trust is a fund into which money is placed to pay for future funeral expenses.
• D. An insurance policy purchased after death.

Answer: (C)

A preneed trust is a way to set aside funds in advance specifically to cover future funeral expenses. You or your family place money into a trust, often through a licensed funeral provider or financial institution, with the understanding that the money will be used to pay for the funeral services later. The trust is typically managed by a trustee and is designed so the funds are dedicated to funeral costs, which can help lock in price and ensure payment when the time comes. This is different from a loan (which must be repaid), a government grant (awarded by the state), or an insurance policy purchased after death (which is a different type of arrangement).