Preneed Contract Transfer and the Missing Trust Money
In 2018, a Colorado funeral home sold a $10,000 "guaranteed" preneed funeral contract to a woman who paid in full. The contract covered services and merchandise, but it did not specify a trust percentage. The funeral home deposited $7,500 into a trust and used $2,500 for operating expenses. The woman moved to another state in 2024 and asked the funeral home to transfer the contract to a provider near her new home. The funeral home says it will transfer only the $7,500 trust balance, not the guaranteed price, and cannot find annual statements. The woman's daughter asks the Colorado Division of Professions and Occupations what the law requires.
1. What are the funeral home's obligations when a preneed contract is transferred to another provider?
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A preneed funeral contract is a consumer contract, and Colorado's Funeral Services Act and preneed rules require the seller to account for the funds and honor the contract terms. On a transfer, the seller must provide the successor provider with the contract, the amount held in trust or insurance, and a written accounting. The seller cannot simply keep the difference between the contract price and the trust balance unless the contract expressly permits that treatment and the law allows it. A "guaranteed" contract generally means the provider bears the risk of future price increases; it does not automatically mean the seller may retain a portion of the original payment. The seller should cooperate with the successor provider and obtain the purchaser's written authorization for the transfer.
2. What records must the funeral home produce, and what problems arise from the missing annual statements?
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The funeral home should produce the signed preneed contract, receipts showing the $10,000 payment, trust deposit records, trust statements, annual accountings, and any correspondence with the purchaser. Missing annual statements are a recordkeeping violation and make it difficult to show that the trust was funded and maintained correctly. Retaining $2,500 for operating expenses may be a trust shortfall if Colorado law required those funds to be held for the purchaser. The funeral home's inability to locate statements also undermines its claim that only $7,500 is available and may support an inference that funds were commingled or misused.
3. If the funeral home cannot honor the guaranteed price, what remedies may the purchaser have?
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The purchaser may file a complaint with the Division, which can investigate the trust funding, require an accounting, and impose discipline on the funeral home and its licensee. The purchaser may also have a civil claim for breach of contract, conversion, or violation of the Colorado Consumer Protection Act, depending on the facts. A practical remedy is to require the funeral home to transfer the full value of the contract or refund the purchase price with appropriate interest, rather than forcing the purchaser to accept a reduced benefit. The funeral home should not condition the transfer on a release of claims.