Preneed contract

Definition

A prepaid funeral arrangement funded through a trust or an assigned life insurance policy.

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.