How is a funeral trust different from a pre-need funeral contract?

A funeral trust manages funds specifically designated for funeral expenses, which distinguishes it from a pre-need funeral contract. This type of trust is set up to ensure that a certain amount of money is set aside to cover these costs, and typically, the funds are managed and invested over time to grow, ensuring that sufficient money is available when needed.

In contrast, a pre-need funeral contract involves agreeing to pay for funeral services and goods at today's prices, which means costs are locked in at the time of the agreement. However, the funds may not necessarily be managed in a trust format, which means if they are in a simple pre-need agreement, they might not be directly earmarked for funeral expenses in the same way a trust would.

The other options misrepresent what a funeral trust is or its applicability. A funeral trust is not an insurance policy, as it does not provide coverage in the event of unexpected or additional expenses beyond the designated funeral costs. It is also not limited in applicability to veterans, as individuals from various backgrounds can utilize funeral trusts. Lastly, a funeral trust is legally binding, providing security that the designated funds are used for their intended purpose, rather than being a non-binding agreement.