Best Michigan Funeral Guide for Reviewing a Prepaid Funeral Contract Before You Sign

A prepaid funeral contract in Michigan is a regulated financial instrument. Before signing one, you need to understand what the Michigan Prepaid Funeral and Cemetery Sales Act requires of the seller, what makes a contract legally irrevocable for Medicaid purposes, and what the risks are if the funeral home closes or is sold before the contract is used.

Most families sign prepaid funeral contracts for one of two reasons: to relieve family members of planning decisions during grief, or as part of a Medicaid planning strategy to spend down countable assets. The rules governing both purposes are specific and different from what funeral home sales staff typically explain at the arrangement table.

Who Controls Prepaid Funeral Contracts in Michigan

Any individual or business selling prepaid funeral contracts in Michigan must be registered and certified with the Michigan Department of Licensing and Regulatory Affairs (LARA). This is not optional — unlicensed sellers of prepaid funeral agreements are in violation of state law.

LARA oversight extends to:

• The terms of the contract itself
• How funds are held
• What happens if the establishment changes ownership
• The consumer's right to cancel
• The disclosure obligations before signing

If you're signing a prepaid contract and the establishment cannot confirm their LARA registration, this is a significant warning sign. You can verify a funeral home's licensing status through the MiCLEAR system (Michigan Commercial Licensing Enforcement and Regulation).

The Escrow Requirement: Your Money Must Be Protected

Michigan law requires that all funds received under a prepaid funeral contract be deposited into an independent escrow account within 30 days. This escrow protection prevents the funeral establishment from using your money for operating expenses or investments — the funds must sit in a separate account until the services are performed.

This matters because funeral establishments close, change ownership, and sometimes go bankrupt. If your prepaid funds are in a properly maintained escrow account, they are protected from the funeral home's creditors in the event of insolvency. If the funds were misappropriated — never deposited into escrow, or withdrawn improperly — you have grounds for a complaint with LARA and potentially a civil claim.

When reviewing a prepaid contract, ask for documentation of the escrow account. The contract itself should identify the financial institution holding the funds, the account structure, and how funds are released to the funeral home upon the time of need.

Guaranteed vs. Non-Guaranteed Contracts: A Critical Distinction

Michigan prepaid funeral contracts come in two types, and the distinction has major financial implications:

Guaranteed price contracts lock in the total price for all covered services and merchandise. When the contract is fulfilled, the funeral home provides the agreed goods and services regardless of what they actually cost at that time. If you purchased a guaranteed contract for $8,000 in 2026 and inflation has pushed those same services to $12,000 by 2041, the funeral home absorbs the difference.

Non-guaranteed contracts do not lock in price. They lock in the selection — the type of casket, the number of days of viewing, the specific package — but the family pays the difference between the prepaid amount and the actual cost at the time of need. For families who are prepaying specifically to control final costs, a non-guaranteed contract delivers only partial protection.

When comparing funeral establishments, ask directly: "If the prices for these services increase between now and when the contract is fulfilled, who pays the difference?" A guaranteed contract means the funeral home absorbs the risk. A non-guaranteed contract means your family does.

Medicaid Irrevocability: The $16,100 Limit and the DHS-8A

For families using a prepaid funeral contract as part of a Medicaid planning strategy — specifically, to convert countable assets into an exempt asset before or during a Medicaid application for long-term care — there are additional statutory requirements.

Michigan's Department of Health and Human Services (MDHHS) Bridges Administrative Manual (BAM 805) governs how prepaid funeral contracts interact with Medicaid eligibility. To be classified as fully irrevocable and therefore entirely exempt from Medicaid's asset calculations, the contract must meet all of these conditions:

1. It must be a guaranteed price contract. Non-guaranteed contracts do not qualify for irrevocable Medicaid-exempt status under MDHHS rules.

2. The principal amount cannot exceed $16,100. This is the 2026 Allowable Principal Value established by MDHHS. Any funds above this cap — including accumulated interest or dividends — are considered countable assets for Medicaid eligibility purposes. If your contract is priced at $18,000 and earns interest bringing it to $18,500, the $2,400 above the $16,100 threshold is countable.

3. The DHS-8A form must be completed. The Irrevocable Funeral Contract Certification (DHS-8A) is the formal documentation submitted to MDHHS. This form cannot be executed until a mandatory 10-day waiting period has elapsed after the contract is signed. The 10-day period preserves the consumer's statutory right of cancellation before irrevocability is formalized.

4. The contract must be assigned to the funeral home. Once irrevocable, the purchaser cannot cancel the contract or recover the funds for any purpose other than the specified funeral services.

One frequently misunderstood point: exceeding the $16,100 limit by even one dollar does not invalidate the entire contract. The amount up to $16,100 remains exempt; the excess is simply treated as a countable asset in the Medicaid calculation. But to maximize the spend-down benefit, the initial principal should not exceed this cap.

The 10-Day Cancellation Window

Before the DHS-8A is executed and the contract becomes irrevocable, Michigan law guarantees consumers a 10-day right of cancellation. During this window, the purchaser can cancel the contract for any reason and receive a full refund.

This cooling-off period exists to protect vulnerable consumers — elderly individuals under pressure from family members or care facility staff — from being locked into large financial commitments without time to reconsider. The funeral establishment cannot shorten this period or waive it.

Once the 10-day period expires and the DHS-8A is signed, the contract is irrevocable. The funds cannot be recovered for living expenses, medical bills, or other purposes.

Portability: What Happens If You Move or the Funeral Home Closes

Portability is one of the most underexplored risks in prepaid funeral contracts. Michigan's regulatory framework requires that funds be held in escrow and that the contract transfer with proper legal procedures if the establishment changes ownership — but practical complications still arise.

If the funeral home is sold: In most cases, the purchasing funeral establishment assumes the prepaid contracts along with the business. However, there is no guarantee that the new owner will provide services of the same quality or maintain the same pricing commitments on non-guaranteed contracts. Review the contract's language on ownership transfer.

If the funeral home closes: Properly escrowed funds are protected from the funeral home's creditors. However, recovering those funds and locating a successor establishment still requires time and administrative effort. LARA can assist in locating where funds were escrowed and initiating recovery procedures.

If you move out of Michigan: Prepaid contracts are generally not portable across state lines. If you move from Michigan to Florida after prepaying for funeral services, you typically cannot simply transfer the contract to a Florida funeral home. Some larger funeral home chains with multi-state presence have internal transfer procedures, but these are business arrangements, not legal guarantees under Michigan law.

An alternative that avoids portability risk: a Payable-on-Death (POD) bank account designated specifically for funeral expenses. This account remains fully under your control throughout your lifetime, earns standard bank interest, is insured by the FDIC, and passes directly to a named family member at death who can use the funds at any funeral home they choose. The tradeoff: a POD account does not qualify for Medicaid irrevocability unless it is structured specifically as a prepaid funeral contract that meets the MDHHS requirements.

Comparison: Prepaid Funeral Contract vs. POD Account for Funeral Expenses

Who This Guide Is For

• Individuals evaluating a prepaid funeral contract presented by a funeral home, cemetery, or funeral prearrangement counselor
• Families whose elderly parent is entering a nursing home and is using a prepaid contract as part of a Medicaid spend-down strategy
• Anyone who signed a prepaid contract years ago and wants to verify it complies with current Michigan law — especially the escrow requirement and the guaranteed price status
• Executors who discovered a prepaid funeral contract in a deceased person's papers and need to understand how to invoke it
• Pre-planners who want to understand the difference between a prepaid funeral contract and other alternatives before committing to any one approach

Who Needs Professional Guidance Beyond This Guide

• Individuals whose Medicaid application involves complex asset structures where the prepaid contract interacts with other exempt assets (homestead, vehicle, life insurance)
• Families where the prepaid contract was with a funeral home that has closed and the escrow funds need to be recovered through LARA or civil proceedings
• Anyone whose DHS-8A was completed incorrectly or where the irrevocability documentation is disputed by MDHHS during a Medicaid application review
• Situations where a family member is suspected of having pressured a vulnerable elder into an inappropriately large prepaid contract — elder financial exploitation cases require an elder law attorney and potentially the Michigan Attorney General's elder abuse unit

The Michigan Funeral Laws & Consumer Rights Guide covers the Prepaid Funeral and Cemetery Sales Act requirements, the Medicaid irrevocability rules, the DHS-8A process, and the practical alternatives to prepaid contracts — giving families the foundation to evaluate any contract before signing and to recognize when something doesn't meet Michigan's legal standards.

FAQ

Can I name multiple funeral homes in a Michigan prepaid contract? No. A prepaid funeral contract designates a specific licensed funeral establishment. The services and merchandise are tied to that establishment's General Price List at the time of purchase (for non-guaranteed contracts) or locked in (for guaranteed contracts). You cannot hedge across multiple establishments with a single contract.

What happens to the interest earned on the escrowed funds? For Medicaid-exempt irrevocable contracts, any interest or dividends earned above the $16,100 principal cap are treated as countable assets. For revocable or non-Medicaid prepaid contracts, the contract terms govern whether accrued interest belongs to the purchaser or the funeral home. This is a point to clarify explicitly before signing.

Can a funeral home refuse a contract if another establishment's prepaid contract is presented at the time of need? Generally, yes. Prepaid contracts are typically binding only on the funeral home that sold them. If the family chooses a different establishment — because they've moved, because the original home has poor reviews, or for any other reason — they may need to invoke the contract's transfer or cancellation provisions, which depend on whether the contract is revocable.

Is a prepaid funeral contract required to have a General Price List attached? Yes. The FTC Funeral Rule requires that the contract accurately reflect the General Price List prices for all selected services and merchandise. A funeral home cannot contract for services at prices higher than their GPL without explanation, and they must provide you a copy of the GPL before the contract is finalized.

If my parent had a prepaid contract but the family used a different funeral home in an emergency, what happens to the prepaid funds? This depends on the contract's terms and whether it is revocable or irrevocable. For revocable contracts, the estate can typically recover the escrowed funds. For irrevocable contracts, the recovery process is more complex — MDHHS must be notified if the contract was used for Medicaid spend-down purposes, and the funds may be subject to specific rules about how they are released. Consult the contract and, if necessary, an elder law attorney.

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