Preneed contract

Definition

An arrangement paid for years before it is needed, with the money held in trust until then.

Why It Matters

The obligation transfers with the business, and it is one of the few liabilities that can exceed the purchase price. A funded book is committed future revenue; an underfunded one is debt you have agreed to service in caskets and staff time. Reconcile the trust balances to the contract ledger yourself, contract by contract for a sample, and price any shortfall dollar for dollar rather than treating it as a rounding difference.