Developed in 1998 by the Government and Legal Affairs Task Force of the International Cemetery and Funeral Association


Trust-funded and insurance-funded prearrangements offer different advantages to purchasers. Each purchaser should compare the features of each funding method when deciding whether to convert prepaid contract trust funds to insurance. Sometimes it may be preferable to convert a prepaid contract that is initially funded through a trust to insurance. Any conversion should protect the rights and interests of the purchaser.


  1. If the purchaser decides to convert the funding mechanism, an agreement should be provided to the purchaser that authorizes the cancellation or modification of the trust-funded prepaid contract and instructs the trustee to pay the proceeds of the trust as premium on a policy.
  2. Prior to conversion, certain written disclosures should be made to the purchaser. These disclosures may include, but not be limited to, that the death benefit available through the life insurance will be greater than the amount paid as premium, however, the cash surrender value of the life insurance will be less than the premium paid; whether the seller/agent will receive a commission for the sale of the life insurance product; and whether the prepaid contract trust funds will incur an early withdrawal penalty. The seller also should comply with the National Association of Insurance Commissioners Life Insurance Disclosure Model Regulation concerning disclosure of information at the time the application is made for insurance.
  3. After conversion, life insurance transactions should be preempted from regulations covering prepaid contract trust funds.
  4. Medicaid and Supplemental Security Income benefits eligibility may have an impact upon individuals who fund their prearrangement with life insurance. The use of irrevocable assignment of ownership, either to the provider or into a life insurance trust, should be available in order to protect the eligibility rights of this class of consumers.