What percent of the funds received by a funeral director for a preneed arrangement must be held in trust?

• A. 100%
• B. 96%
• C. 94%
• D. 90%

Answer: (A)

Funds paid for a preneed arrangement are held in trust to separate them from the funeral home’s general assets and to guarantee the contract can be fulfilled. California law requires the full amount paid for a preneed contract to be placed in trust, so the funds are dedicated solely to that contract and protected from creditors or mismanagement. This setup ensures the money will be available to provide the promised services when the time comes, even if the funeral home encounters financial trouble. Interest may accrue for the purchaser, but the principal remains in trust and cannot be diverted. Because the protection hinges on placing the entire amount in trust, the required percentage is 100 percent.