Preneed Funeral Contracts and Preneed Program Services
Contract requirements
A NC preneed funeral contract must be written, signed, and disclose the goods and services, price, funding method, and cancellation terms. The seller must give the purchaser a copy and may not use vague package language that hides itemization. Preneed contracts are either trust-funded or insurance-funded.
Funding and trust
Trust-funded contracts require deposits into a preneed trust account with a qualified trustee; funds may not be commingled with the funeral home's operating account. Insurance-funded contracts require the policy to be assigned or to name the funeral establishment as beneficiary so proceeds are dedicated to the contract. The seller must report on the trust and make records available to the Board.
Revocation and performance
The purchaser generally has a statutory right to revoke and receive the refund provided by the contract and statute; the seller cannot simply keep the principal. If the purchaser moves or the original provider cannot perform, the contract may be transferred or refunded as the statute allows.
Worked example
A funeral home sells a $9,000 preneed contract, deposits $6,000 in trust, and uses $3,000 for current expenses. Even if the contract says nonrefundable, the underfunded trust violates the funding requirement. The Board can require correction and discipline the seller. The correct approach is to deposit the required amount on time and keep the trust records reconciled.
Traps
Treating trust money as working capital, failing to disclose whether the contract is trust- or insurance-funded, missing the revocation period, and selling preneed without the proper registration are common failures.