Texas prepaid funeral contracts are regulated by the Texas Department of Banking under Chapter 154 of the Finance Code, which requires every seller to hold a state permit, directs your money into either a trust account or a life insurance policy, and gives you the right to cancel in most cases, though your refund depends on how the contract was funded and when it was sold.1State of Texas. Texas Finance Code 154 – Prepaid Funeral Services The practical questions a buyer or a family member needs answered are below.
Check the Seller’s Permit First
No person or business may sell or offer to sell a prepaid funeral contract in Texas without a permit issued by the banking commissioner.1State of Texas. Texas Finance Code 154 – Prepaid Funeral Services That rule covers funeral homes, cemeteries, and third-party sales organizations alike. The Department of Banking keeps a searchable database of permit holders on its website, and you can look up a provider by legal name or permit number before you pay anything.2Texas Department of Banking. Our Purpose If the seller cannot give you a permit number or does not appear in the database, stop there.
Permitted sellers are examined at least once every two years, and more often when circumstances warrant it, to confirm their records are accurate and that they can meet their obligations to contract holders.1State of Texas. Texas Finance Code 154 – Prepaid Funeral Services When a funeral home changes ownership, the funds in a trust-funded contract remain in a separate trust account regardless of who owns the business, and for insurance-funded contracts the insurance company holds the policy independently of the funeral home. A new owner’s refusal to honor a valid contract is the kind of matter the department investigates.
Trust-Funded or Insurance-Funded
Texas contracts come in two funding types, and the distinction drives almost everything that follows.
With a trust-funded contract, the seller deposits your payments into a restricted trust account at a financial institution. The seller cannot freely draw on those funds for operating expenses, and the trust holds the money until the services are performed. Interest accrues inside the trust, and how much of those earnings you ever see depends on when the contract was sold and whether you cancel.
With an insurance-funded contract, your payments become premiums on a life insurance policy or annuity issued by a licensed insurer. The policy is designated to cover your funeral costs, and when death occurs the insurer pays the benefit to the funeral provider. Your money is not sitting in a bank account; it is governed by the policy terms, including the policy’s own cash surrender value schedule.3Justia. Texas Finance Code 154 – Prepaid Funeral Services
What the Contract Must Include
Every prepaid funeral contract in Texas must be in writing on a form approved by the Department of Banking. It must name the funeral provider or entity primarily responsible for delivering the services and describe exactly what the purchaser will receive, including the specifications and materials of any casket or outer burial container.4Texas Department of Banking. Prepaid Funeral Contracts, Perpetual Care Cemeteries Each contract designates one individual as the beneficiary, and only one beneficiary per contract is allowed.
Before you sign, the seller is required by statute to give you a state-produced informational brochure explaining your rights as a purchaser.5Texas Department of Banking Prepaid Funerals. Prepaid Funeral Planning Brochure Sample contract forms are posted on the state’s official site so you can read the standard language before meeting a salesperson.2Texas Department of Banking. Our Purpose A seller who skips the brochure or presses you to sign on the spot is a warning sign.
Ask for the General Price List
Separate from the Texas contract rules, every funeral provider in the country must comply with the FTC Funeral Rule. That rule entitles you to an itemized General Price List showing the cost of every good and service the provider offers, and it lets you buy only the items you want rather than a bundled package. The list must disclose that embalming is not always required by law, that alternative containers are available for direct cremation, and that the basic services fee is the only mandatory charge. Providers who violate the Funeral Rule face federal penalties of up to $53,088 per violation.6Federal Trade Commission. Complying with the Funeral Rule Ask for the General Price List before you compare prepaid proposals, and use it to test whether the contract pricing is fair.
Canceling and Getting Your Money Back
You can cancel a prepaid funeral contract in Texas. What you receive back depends on the funding type and, for trusts, on when the contract was sold.
Trust-Funded Cancellations
Cancel a trust-funded contract and your refund is generally the amount you paid minus 10 percent of the contract’s total face value. The seller has 30 days from receiving the completed cancellation forms to send the refund.7Texas Department of Banking. FAQs On a large contract that 10 percent deduction is meaningful, so weigh it before you sign.
Accrued interest is a separate question. If your contract was sold after September 1, 2001, and has been outstanding for more than one year, you are entitled to 50 percent of the net accrued earnings on top of your refund. Contracts sold before that date carry no right to accrued earnings.7Texas Department of Banking. FAQs
One situation gives the consumer the full benefit: if the seller asks you to cancel, you are entitled to all funds paid plus 100 percent of the accrued earnings.7Texas Department of Banking. FAQs Never agree to a seller-initiated cancellation without confirming you are being paid the full statutory amount.
Insurance-Funded Cancellations
Canceling an insurance-funded contract gets you the cash surrender value of the underlying policy or annuity. Cash surrender values are notoriously low in the early years, so canceling within the first few years can return substantially less than you paid in.7Texas Department of Banking. FAQs Ask for the policy’s surrender value schedule up front and compare it to the trust-funded refund terms before you decide on a funding type.
Revocable vs. Irrevocable
A contract can be structured as revocable, which preserves your right to cancel on the terms above, or irrevocable, which gives up that right permanently. The usual reason to choose irrevocable is Medicaid planning. When a Texas resident applies for Medicaid long-term care benefits, the state counts most assets against the eligibility threshold, but funds locked in an irrevocable prepaid funeral contract are generally not counted as available assets. That makes irrevocable contracts a common spend-down tool for applicants who still want their funeral covered. Because the commitment cannot be undone, talk to an elder law attorney before signing an irrevocable contract if Medicaid is part of your planning.
If the Seller Fails or Mishandles Your Money
The Texas Prepaid Funeral Guaranty Fund, established under Subchapter H of Chapter 154, exists to guarantee performance by sellers and funeral providers under prepaid contracts when a permitted seller cannot meet its obligations.8State of Texas. Texas Finance Code Section 154.351 A statutory Guaranty Fund Advisory Council supervises the fund’s operation and maintenance.9Texas Department of Banking. Guaranty Fund Advisory Council If a permit holder goes insolvent and contracted services cannot be provided, the fund is designed to cover the loss so prepaid benefits are not wiped out. It is one of the strongest reasons to buy only from a permitted Texas seller.
Short of insolvency, if a seller fails to deliver contracted services, mishandles funds, or otherwise breaks the agreement, the Department of Banking investigates consumer complaints. The department will not step in if the matter is already in litigation or a court has ruled.10Texas Department of Banking. How to File a Complaint
To file, complete the Non-Depository Supervision Consumer Complaint Form or write a letter laying out the problem in chronological order. Include the entity’s name and location, relevant dates, and legible copies of supporting documents. Do not send originals. Mail to the Texas Department of Banking, Non-Depository Supervision Division, 2601 N. Lamar Blvd., Austin, Texas 78705-4294, or email Pfcpcc@dob.texas.gov.10Texas Department of Banking. How to File a Complaint A straightforward case typically takes about six to eight weeks from filing to resolution.