Understanding Irrevocable Trust-Funded Preneed Funeral Contracts
Question:
An irrevocable trust-funded preneed funeral contract must not be converted to what?
- a. An insurance funded preneed funeral contract
- b. A cash-funded preneed funeral contract
- c. A government-funded preneed funeral contract
- d. A family-funded preneed funeral contract
Final answer:
Answer:
An irrevocable trust-funded preneed funeral contract must not be converted to an insurance-funded preneed funeral contract, as it would involve a change in control inconsistent with an irrevocable trust. The correct option is A.
Explaining Irrevocable Trust-Funded Preneed Funeral Contracts
An irrevocable trust-funded preneed funeral contract is a legal agreement where an individual pays in advance for their funeral arrangements. The funds are held in trust and cannot be altered or canceled, hence the term 'irrevocable'. This type of contract provides peace of mind that funeral expenses will be covered and ensures that the individual's final wishes regarding their funeral are honored.
The correct answer to the question is option a. An insurance-funded preneed funeral contract. This is because an insurance-funded contract is a different type of pre-need arrangement where a life insurance policy is used to cover the cost of funeral arrangements. Once established as an irrevocable trust, it generally cannot be converted into an insurance product as this would imply a level of control over the funds by the policyholder that is inconsistent with an irrevocable trust agreement.
Options b, c, and d do not accurately represent a conversion that would be inconsistent with the nature of an irrevocable trust-funded preneed funeral contract. These options either do not exist in practice or would not involve the same type of change in control over the prearranged funds as the conversion to an insurance product would.
The correct option is A.
Final Answer:
An irrevocable trust-funded preneed funeral contract must not be converted to a cash-funded preneed funeral contract. Option B is the answer.