[Congressional Record Volume 153, Number 106 (Thursday, June 28, 2007)]
[Senate]
[Pages S8713-S8714]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HATCH (for himself, Mr. Kohl, Mr. Specter, and Mr. Crapo):
  S. 1743. A bill to amend the Internal Revenue Code of 1986 to repeal 
the dollar limitation on contributions to funeral trusts; to the 
Committee on Finance.
  Mr. HATCH. Mr. President, I rise today to introduce a bill to 
eliminate the current dollar limitation on Qualified Funeral Trusts, 
QFTs. Congress created these savings vehicles in 1997 to assist 
individuals and families who wanted to plan for, and prepay, funeral 
expenses. Yet, funeral costs are rising

[[Page S8714]]

rapidly, and the arbitrary cap that Congress imposed on QFTs makes 
planning more difficult. Today I am proud to introduce this bipartisan 
legislation, along with my colleague from Wisconsin, the chairman of 
the Special Committee on Aging, Senator Kohl. We are also joined by two 
of our distinguished colleagues, Senators Specter and Crapo. The change 
would have a positive impact on the lives of older Americans and on 
their families. In addition, according to the Joint Committee on 
Taxation, it would have a slight, but positive, impact on the Federal 
treasury.
  When Congress created QFTs, it did so as a tax simplification 
measure. Unfortunately, it capped the size of these trusts at $7,000, 
adjusted regularly for inflation. This year, the inflation-adjusted cap 
is $8,800, but in many instances, this amount is no longer sufficient 
to cover a family's funeral expenses. In Utah, the average cost of a 
full funeral and burial is $12,685. I am sure that in many other states 
it is even higher. Because of this contribution limit, even those who 
preplan their own funerals too often leave their heirs with substantial 
expenses. Even those who attempt to cover the entire expense may not 
have enough money to cover all costs after administrative fees and 
taxes are deducted.
  This proposal would make Qualified Funeral Trusts more effective. The 
principal reason individuals set up Qualified Funeral Trust plans is to 
lift a financial burden from their children. Ordinarily, trusts for 
funeral expenses are grantor trusts, and the beneficiary is responsible 
for paying any tax on income generated by the trust. Congress 
recognized, however, that this result created an administrative burden 
for the beneficiary or the funeral director trustee. As a result, 
Congress enacted Section 685 of the Internal Revenue Code, allowing 
funeral director trustees to elect to pay the tax on income earned by 
funeral trusts. This tax simplification measure eased the paperwork 
burden and administrative costs on funeral director trustees, who were 
previously required to issue hundreds of 1099 forms to their elderly 
customers. It also eliminated the tax liability and confusion of many 
elderly Americans who previously received these forms. Unfortunately, 
only those trusts under the cap are currently eligible for designation 
as QFTs. By removing this restrictive cap, our legislation will 
eliminate unnecessary administrative burdens on beneficiaries and 
trustees.
  Let me give you an example of how the current cap creates unnecessary 
confusion for families. I have used this example before. It remains 
worth telling. Four years ago, a constituent of mine wrote me about 
this situation. He was suffering from Parkinson's disease. So he began 
planning his own funeral in order that these decisions and this burden 
would be lifted from his children. Because of the cap on QFTs, however, 
which at the time was $7,800, this Utahn was not able to fully fund the 
funeral services he desired. It became necessary to have one of his 
sons complete this planning for him by opening up his own, separate 
trust that would help to cover the remaining expenses. We should not be 
making it hard for families to do the right thing. We should not be 
making families jump through extra hoops when all they are trying to do 
is make these responsible decisions, well in advance of need.

  For older Americans, the primary benefits of this legislation are the 
ability to have all the money they have saved in the trust be applied 
to final expenses, instead of taxes, and the incentive to increase the 
amount of their contribution. Sixty percent of prefunded funerals were 
funded by trusts and elimination of the cap should raise this 
percentage. For funeral directors, this change would eliminate the 
burden and expense of issuing information documents to report income 
earned from the trust.
  The National Funeral Directors Association supports this legislation. 
So too do numerous funeral homes that serve the people of Utah.
  I have no doubt that many more of these funeral businesses, many of 
which are family-owned and family-run, that serve local communities 
from coast to coast support this legislation as well.
  I think we can all agree that we should make it easier for those who 
are willing to provide for these necessary expenses in advance. Today, 
I ask my colleagues to join me in an effort to enact this important 
measure.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 1743

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. REPEAL OF DOLLAR LIMITATION ON CONTRIBUTIONS TO 
                   FUNERAL TRUSTS.

       (a) In General.--Subsection (c) of section 685 of the 
     Internal Revenue Code of 1986 (relating to treatment of 
     funeral trusts) is repealed.
       (b) Conforming Amendment.--Subsections (d), (e), and (f) of 
     such section are redesignated as subsections (c), (d), and 
     (e), respectively.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2006.

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