What Happens to a Prepaid Funeral Plan If the Funeral Home Closes?

Your prepaid funeral plan usually survives if the funeral home closes. The money sits in a regulated trust or insurance policy, not in the business, so your family can apply it to another funeral home. A prepaid funeral plan is a preneed contract you pay for before death. The catch is that guaranteed prices and state safeguards may not travel with the money.

Table of Contents

• Where Is Your Money Held?
• Can You Use the Plan at Another Funeral Home?
• How Do States Handle a Closure?
• What Should You Do Next?

Where Is Your Money Held?

The Federal Trade Commission says prepaid payments usually go into a state-regulated trust or an assigned life-insurance policy the FTC's funeral planning guide. The cash does not stay in the home's operating account.

With a trust, a trustee holds the funds for your contract. With insurance funding, an insurer holds the policy that later pays funeral costs.

Can You Use the Plan at Another Funeral Home?

Titan Casket explains that trust money still belongs to the contract after a closure Titan Casket's prepaid-plan guide. It should be available to pay a different funeral home. The new home may not honor the original guaranteed prices.

Titan Casket also reports an insurance-funded policy remains in force because it is with the insurer. You or your family can assign the proceeds to another funeral home. The Virginia Board of Funeral Directors and Embalmers lets buyers use contract proceeds at another funeral home if the seller closes before death. If the closure surfaces only at death, the named designee can direct the funds elsewhere.

How Do States Handle a Closure?

In New York, the State Department of Health requires a closed home to return preneed trust money with interest its preneed rights guide. With your written authorization, it can instead transfer the funds to another funeral home. The home must also notify the Health Department of the disposition. Texas shows how regulators can step in. The Texas Department of Banking issued a Jan.

30, 2024 seizure order against Lewis Funeral Home in San Antonio. The order covered prepaid funeral accounts and sales records. State law lets the commissioner seize accounts for misappropriation or refusal to pay. Protection is uneven. Brennan and Rogers explains the FTC Funeral Rule requires itemized price lists and bars misrepresentation but does not directly regulate prepaid contracts. Some buyers in weak-protection states have lost funds.

What Should You Do Next?

Act early and keep records together. The Michigan Attorney General advises keeping the signed contract, confirming the trustee or insurer in writing, and asking about transfer, refund and interest rules its prepaid-contracts alert.

Do not wait until the death to trace the money. If the seller closed or transferred accounts, contact the state funeral board for help.

• Find the signed contract and payment receipts.
• Write to the trustee or insurer to confirm funds and owner.
• Ask about transfer, refund, interest, and fees.
• Contact the state funeral board if the seller closes or moves accounts.

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