Prepaid Funeral Contracts and Irrevocable Funeral Trusts in Louisiana

A prepaid funeral contract in Louisiana is a legal agreement between a consumer and a licensed funeral home. You pay now — in full or in installments — and the funeral home agrees to provide specified services and merchandise at death. The contract locks in arrangements and, depending on how it is written, may lock in the price as well.

Louisiana law governing these contracts sits primarily in La. R.S. 37:861. Understanding the rules matters most when a family is facing a nursing home admission or Medicaid application, because the type of contract chosen — revocable or irrevocable — has direct consequences for asset eligibility.

Where the Money Goes

When you sign a preneed contract, Louisiana law requires the funeral home to deposit your funds into one of two places within seven days of signing: a preneed funeral trust account held at a financial institution, or a preneed life insurance policy or annuity purchased in your name. The funeral home cannot pocket the money and apply it later. The deposit requirement is not optional.

This matters because the trust or insurance product holds the funds at arm's length from the funeral home. If the funeral home closes, is sold, or goes bankrupt, your money is not part of their general assets.

The funeral home cannot access those funds until it presents a certified death certificate to the financial institution holding the trust. Until that moment, the money stays protected.

Revocable Contracts: The 10-Day Window and What Comes After

Every preneed contract in Louisiana comes with a 10-day cooling-off period. Within ten days of signing, you can cancel for any reason and receive a full refund. No questions asked, no fees withheld.

After that 10-day window closes, a revocable contract can still be cancelled — but the process is more formal. You must send written notice by certified mail to the funeral home. Once the funeral home receives that notice, it has 10 business days to process the cancellation and return your funds. The refund may be reduced by any early withdrawal penalties charged by the bank holding the trust. Those penalties are passed through to you; they are not the funeral home's margin.

Revocable contracts are appropriate for most people who are not in a Medicaid planning context. They provide flexibility while still locking in funeral arrangements.

Irrevocable Contracts: When Flexibility Disappears

An irrevocable funeral contract cannot be cancelled or modified by either party after it is signed. Neither you nor the funeral home can undo it. The funds are permanently committed to funeral expenses.

Why would anyone sign one? Medicaid.

Medicaid counts most assets when determining nursing home eligibility. But a properly structured irrevocable funeral trust (IFT) is fully exempt from that count, up to a specific limit. Louisiana follows the federal Medicaid rules on this point, which allow states to exempt prepaid funeral arrangements used for the applicant's own burial. In Louisiana, that cap is $10,000.

If you fund an IFT with $10,000 or less and the contract is properly irrevocable, the entire amount is excluded when Medicaid calculates your countable assets. This is one of the few legal ways to spend down assets before nursing home admission.

The Overfunding Trap

Here is where families make expensive mistakes. The $10,000 exemption is a ceiling, not a suggestion. If an irrevocable funeral trust is funded above $10,000 — say, $12,000 — the excess $2,000 does not disappear. It counts against Medicaid's asset limit.

Louisiana Medicaid applicants must have countable assets at or below $2,000 to qualify for nursing home coverage. If an overfunded IFT pushes countable assets above that threshold, the applicant may be disqualified from coverage until they spend down that excess. That can mean delaying nursing home admission, returning money from the trust (which is legally complicated with an irrevocable contract), or losing coverage during a critical period.

The trap is easy to walk into. Funeral homes sometimes suggest comprehensive packages that exceed $10,000 in value. Some families want to include extra services. Before signing any irrevocable contract in a Medicaid context, the total funding amount must be confirmed to be at or below $10,000.

It is also worth noting that the IFT exemption applies only to the applicant's own funeral. A spouse's IFT is a separate matter, governed by different spousal protection rules.

What Happens at Death

When the person named in the preneed contract dies, the funeral home provides the contracted services. To access the trust funds, the funeral home submits a certified death certificate to the financial institution holding the account. The institution then releases the funds directly to the funeral home.

Families do not receive those funds. They pass from the trust to the funeral home in exchange for the services rendered. If the cost of services at the time of death exceeds the amount in the trust, the family may owe the difference depending on how the contract is written. Price-guaranteed contracts protect against this; price-adjustable contracts do not.

If the funeral home has closed or is otherwise unable to perform the services, Louisiana law requires the funds be transferable to another licensed funeral home.

Medicaid Estate Recovery and the Funeral Expense Offset

After a Medicaid recipient dies, the Louisiana Department of Health (LDH) is entitled to recover from the estate the amount Medicaid paid for care. This is the estate recovery program, and it can significantly reduce what heirs receive. For a fuller explanation of how it works, see our post on Louisiana Medicaid estate recovery.

There is a specific protection worth knowing in the funeral context. LDH allows families to offset up to $10,000 in reasonable funeral and burial expenses against the state's estate recovery claim. This offset applies to expenses paid at or after death — it does not apply to costs already covered by a prepaid arrangement.

So if the estate owes LDH $40,000 in recovery and the family paid $8,000 for funeral services out of pocket, the recoverable amount is reduced to $32,000. This offset is not automatic — it must be claimed during the estate recovery process.

Several exceptions stop estate recovery entirely. If a surviving spouse is alive, recovery is deferred until that spouse's death. If a minor child under 21 survives the Medicaid recipient, recovery does not proceed. The same protection applies if a child of any age is blind or permanently disabled. And if the total Medicaid payout was less than $1,000, LDH does not pursue recovery at all.

Practical Decisions

For most families not navigating Medicaid, a revocable preneed contract is the straightforward choice. It locks in arrangements, puts funds in a protected trust, and still allows cancellation if circumstances change.

For families in a Medicaid planning situation — particularly those facing an imminent nursing home admission — an irrevocable funeral trust of exactly $10,000 is a commonly used, legally sound strategy to reduce countable assets. The key decisions are: keeping the amount at or below $10,000, ensuring the contract is properly structured as irrevocable under Louisiana law, and confirming all other asset spend-down steps are coordinated with an elder law attorney.

For detailed guidance on Louisiana funeral laws, what contracts must include, your rights as a consumer, and how to verify a funeral home's license status, see our Louisiana Funeral Law Guide.

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