The Preneed Contract That Crossed the County Line
In 2016, a 70-year-old woman bought a preneed funeral contract from a Greensboro funeral home. The contract was funded by a single-premium life insurance policy with the funeral home as beneficiary. It states that services will be provided at the Greensboro location and that the contract is 'not transferable.' She paid $9,800. She now lives in Asheville, is terminally ill, and wants your Asheville funeral home to handle her funeral. The Greensboro home says it will keep the insurance proceeds and that your firm must charge the family full price; alternatively, it will 'allow' a transfer if your firm pays a 25% transfer fee. The daughter calls you for advice. The patient is still alive and mentally competent, but her health is declining. The original contract does not name an agent for disposition.
1. Is the preneed contract transferable to the Asheville funeral home under North Carolina preneed law? What happens to the funds?
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The 'not transferable' clause is not enforceable under North Carolina preneed law. A preneed funeral contract is a consumer contract that must be transferable to another licensed funeral establishment when the buyer moves or chooses another provider. The seller cannot use a boilerplate no-transfer clause to trap the funds. The buyer should make a written transfer request, signed by the contract owner, identifying the Asheville funeral home. The Greensboro seller must then transfer the contract and the funds or insurance proceeds attributable to it to the new provider, subject to the statute's accounting rules. If the policy has not paid yet, the beneficiary designation and ownership must be handled correctly; if it has paid, the seller holds the money for the contract, not as a windfall.
2. Can the original seller charge a 25% transfer fee or keep the entire insurance proceeds? Explain.
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A 25% transfer fee is almost certainly an unauthorized charge. The statute and Board rules permit specified fees and a permitted sales or service charge, but they do not allow the seller to invent a 25% penalty to discourage transfer. The seller also cannot keep the entire insurance proceeds and force the family to pay your firm full price. If the contract is insurance-funded, the seller is entitled to the proceeds only to the extent of the contract obligations; any excess belongs to the estate or the named beneficiary. The correct approach is an accounting: contract price, payments, trust or insurance value, permitted fees, and the amount to be transferred. If Greensboro refuses, the daughter should file a complaint with the Board and the insurance regulator; the Board can discipline the preneed licensee.
3. What should the Asheville funeral home do before providing services or accepting an assignment of the contract?
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Before you provide services, get a written transfer and verify the money. Ask the contract owner to sign a transfer or assignment authorizing Greensboro to release the contract and funds to your firm. Obtain from Greensboro a written statement of the contract status, the funding vehicle, the amount held, and any fees claimed. If the policy is still in force, confirm the beneficiary designation and whether the owner can change it. Do not tell the family to pay you and fight Greensboro later unless they knowingly agree. If the transfer is refused, offer to provide services under a new contract with a clear written cancellation and refund plan, and advise the family of the Board complaint process. Your firm should not accept the old contract as paid until the funds are actually transferred or the insurance beneficiary designation is changed.