---
kind: "section"
citation: "26 U.S.C. § 685"
title: "26"
title_heading: "Internal Revenue Code"
number: "685"
heading: "Treatment of funeral trusts"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/26/685"
units:
  - "Subtitle A — Income Taxes"
  - "Chapter 1 — Normal Taxes and Surtaxes"
  - "Subchapter J — Estates, Trusts, Beneficiaries, and Decedents"
  - "Part I — Estates, Trusts, and Beneficiaries"
  - "Subpart F — Miscellaneous"
---

# §685. Treatment of funeral trusts

- (a) **In general—** In the case of a qualified funeral trust—
  - (1) subparts B, C, D, and E shall not apply, and
  - (2) no deduction shall be allowed by [section 642(b)](/usc/26/642.md?p=b).
- (b) **Qualified funeral trust—** For purposes of this subsection, the term “qualified funeral trust” means any trust (other than a foreign trust) if—
  - (1) the trust arises as a result of a [contract](/usc/26/101.md?p=f-3-A) with a person engaged in the [trade or business](/usc/26/1402.md?p=c) of providing funeral or burial services or [property](/usc/26/317.md?p=a) necessary to provide such services,
  - (2) the sole purpose of the trust is to hold, invest, and reinvest [funds](/usc/26/851.md?p=g-2) in the trust and to use such [funds](/usc/26/851.md?p=g-2) solely to make payments for such services or [property](/usc/26/317.md?p=a) for the benefit of the beneficiaries of the trust,
  - (3) the only beneficiaries of such trust are individuals with respect to whom such services or [property](/usc/26/317.md?p=a) are to be provided at their death under [contracts](/usc/26/101.md?p=f-3-A) described in [paragraph (1)](#b-1),
  - (4) the only contributions to the trust are contributions by or for the benefit of such beneficiaries,
  - (5) the trustee elects the application of this subsection, and
  - (6) the trust would (but for the election described in [paragraph (5)](#b-5)) be treated as owned under subpart E by the purchasers of the [contracts](/usc/26/101.md?p=f-3-A) described in [paragraph (1)](#b-1).

  A trust shall not fail to be treated as meeting the requirement of [paragraph (6)](#b-6) by reason of the death of an individual but only during the 60-day period beginning on the date of such death.

- (c) **Application of rate schedule—** [Section 1(e)](/usc/26/1.md?p=e) shall be applied to each qualified funeral trust by treating each beneficiary’s [interest](/usc/26/856.md?p=f-1) in each such trust as a separate trust.
- (d) **Treatment of amounts refunded to purchaser on cancellation—** No gain or loss shall be recognized to a purchaser of a [contract](/usc/26/101.md?p=f-3-A) described in [subsection (b)(1)](#b-1) by reason of any payment from such trust to such purchaser by reason of cancellation of such [contract](/usc/26/101.md?p=f-3-A). If any payment referred to in the preceding sentence consists of [property](/usc/26/317.md?p=a) other than money, the basis of such [property](/usc/26/317.md?p=a) in the hands of such purchaser shall be the same as the trust’s basis in such [property](/usc/26/317.md?p=a) immediately before the payment.
- (e) **Simplified reporting—** The Secretary may prescribe rules for simplified reporting of all trusts having a single trustee and of trusts terminated during the year.

## Source credit

(Added Pub. L. 105–34, title XIII, § 1309(a), Aug. 5, 1997, 111 Stat. 1042; amended Pub. L. 105–206, title VI, § 6013(b), July 22, 1998, 112 Stat. 820; Pub. L. 110–317, § 9(a), (b), Aug. 29, 2008, 122 Stat. 3530.)

## Notes

### Editorial Notes

### Amendments

2008—Subsecs. (c) to (f). Pub. L. 110–317 redesignated subsecs. (d) to (f) as (c) to (e), respectively, and struck out former subsec. (c), which related to dollar limitation on contributions to qualified funeral trusts.

1998—Subsec. (b). Pub. L. 105–206, § 6013(b)(1), inserted concluding provisions.

Subsec. (f). Pub. L. 105–206, § 6013(b)(2), inserted “and of trusts terminated during the year” before period at end.

### Statutory Notes and Related Subsidiaries

### Effective Date of 2008 Amendment

Pub. L. 110–317, § 9(c), Aug. 29, 2008, 122 Stat. 3530, provided that: “The amendments made by this section [amending this section] shall apply to taxable years beginning after the date of the enactment of this Act [Aug. 29, 2008].”

### Effective Date of 1998 Amendment

Amendment by Pub. L. 105–206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 6024 of Pub. L. 105–206, set out as a note under section 1 of this title.

### Effective Date

Pub. L. 105–34, title XIII, § 1309(c), Aug. 5, 1997, 111 Stat. 1043, provided that: “The amendments made by this section [enacting this section] shall apply to taxable years ending after the date of the enactment of this Act [Aug. 5, 1997].”