South Carolina Funeral Law Practice Exam

An irrevocable trust-funded preneed funeral contract must not be converted to what?

1. A cash-funded preneed contract

2. An insurance funded preneed funeral contract

3. A flexible premium contract

4. A guaranteed contract

The correct answer is: An insurance funded preneed funeral contract

An irrevocable trust-funded preneed funeral contract is specifically designed to remain unchanged once it is established. The nature of "irrevocable" means that under typical circumstances, the terms cannot be modified, including any funding arrangements. When considering what it must not be converted to, the focus is on the implications of changing the funding mechanism associated with the contract. Converting to an insurance-funded preneed funeral contract would represent a fundamental alteration in how the preneed benefits are secured. Insurance-funded contracts typically offer different terms, payment structures, and may introduce varying levels of risk and regulatory oversight, which would compromise the original intent and protections of the irrevocable trust. On the other hand, the other choices—cash-funded contracts, flexible premium contracts, or guaranteed contracts—may not maintain the same level of risk or regulatory implications when compared to insurance-funded contracts, which often have specific considerations for irrevocability. Thus, converting to an insurance-funded preneed funeral contract represents a significant change in both the structure and security intended in an irrevocable trust arrangement.