Nevada Preneed Funeral Contract Rules: Prepaid Plans, Trusts, and Cancellation Rights

Prepaid funeral contracts are one of the most heavily marketed financial products in the elder care space — and one of the most misunderstood. Nevada law under NRS Chapter 689 provides substantial consumer protections, but those protections only work if you understand the terms you are signing. Here is what the law actually requires, what happens to your money, and what your rights are if you change your mind.

What Is a Nevada Preneed Contract?

A preneed funeral contract is an agreement you sign with a funeral home or cemetery while you are still alive, locking in funeral or burial services at today's prices for future delivery. The appeal is understandable: you spare your family from making decisions under emotional duress, and you potentially lock in pricing before costs rise.

Nevada strictly controls who can sell these contracts. Under NRS Chapter 689, a preneed contract seller must hold a valid seller's certificate issued by the Commissioner of Insurance. If someone approaches you to sell a prepaid funeral plan without that certificate, they are operating illegally.

Where Does Your Money Go?

This is the question most people do not think to ask. When you pay for a preneed funeral contract in Nevada, the funeral home does not simply pocket your money and reserve services for you. State law requires the seller to place the funds into an approved trust — within 15 days after the end of the month in which your payment was received.

The trust must be held by an authorized institution: a state or national bank, a licensed trust company, or a federally insured savings and loan association or credit union. The trustee must manage the funds with prudent investor standards — prioritizing the safety of your principal over speculative investments.

What the seller can access from trust earnings:

• Up to 75% of accrued earnings can be disbursed to the seller for administrative costs
• At least 25% of all earnings must remain in trust to build a security reserve

Your principal stays in trust until the services are rendered. This is the consumer protection at the heart of Nevada's preneed law.

Revocable vs. Irrevocable Contracts

Most prepaid funeral plans are revocable by default — meaning you can cancel at any time and get your money back. But there is a second category, irrevocable contracts, that functions very differently and is specifically designed for Medicaid planning.

Revocable Contracts

If you move out of state, decide to switch funeral homes, or simply change your mind, you can terminate a revocable preneed contract. Under Nevada law, when you notify the trustee of cancellation, the trustee must refund all money held in trust for your account — including earned interest — as soon as reasonably possible after receiving notice.

You do not need the funeral home's permission to cancel. The refund flows from the trust directly to you.

Irrevocable Funeral Trusts and Medicaid

An irrevocable funeral trust is a preneed contract you cannot cancel or cash out — you permanently sign away your ability to recover the principal. The reason to do this: irrevocable funeral trusts are excluded from Medicaid asset calculations in Nevada, up to a maximum of $15,000, provided the trust includes a detailed Goods and Services Statement proving the funds are strictly designated for funeral and disposition services.

This matters enormously for elder care planning. Medicaid's asset limits are strict. An irrevocable funeral trust allows you to set aside funds for your own funeral without those funds counting as an asset that would disqualify you from Medicaid coverage for nursing home or long-term care costs.

Critical requirements for Medicaid eligibility:

• The trust must be irrevocable (you cannot retain the right to cancel or withdraw)
• The maximum exempt amount is $15,000
• A Goods and Services Statement must be attached to the trust documenting exactly what funeral and disposition services the money is reserved for
• The trust cannot be used for anything other than the specified funeral services

If you are entering long-term care or anticipating Medicaid enrollment, talk with a Nevada elder law attorney before setting up an irrevocable funeral trust. The rules around how this interacts with the Medicaid spend-down process are precise, and errors can cost the estate significant money.

What Happens If You Default on Installment Payments?

Some preneed contracts are structured as installment agreements, particularly for cemetery merchandise (urns, memorials, grave markers, vaults) and opening-and-closing services. If you fall behind on payments and the contract goes into default:

Nevada law limits the financial penalty the seller can impose. The cemetery or funeral home may retain — as damages — no more than 40% of the total purchase price. Any balance from your payments beyond that 40% must be fully refunded to you.

This cap exists precisely because people's financial circumstances change, and the legislature did not want a single missed payment to result in a total financial loss for the consumer.

If the Funeral Home Goes Out of Business

A major fear for preneed contract holders: what happens to your money if the funeral home closes before you die?

Under NRS 689.580, if a funeral establishment or cemetery authority:

• Goes out of business
• Declares bankruptcy
• Makes an assignment for the benefit of creditors
• Becomes otherwise insolvent

All outstanding preneed contracts are automatically terminated. The exception is if a qualified successor business formally agrees to assume the liabilities and honor the original contract terms.

Upon termination due to insolvency, the trustee must distribute the trust funds — including all earned interest — directly back to the buyer. Your money is not absorbed into the bankruptcy estate because it was never in the funeral home's operating account; it was in a separate, protected trust.

This trust structure is the critical consumer protection. Intentional misappropriation of preneed trust funds is a severe crime in Nevada, punishable by administrative fines up to three times the value of the preneed agreement, plus criminal prosecution.

How to Cancel a Nevada Preneed Funeral Contract

If you have a revocable preneed contract and want to cancel:

1. Locate your contract documents — you need the account number, the name of the funeral home, and ideally the name of the trustee institution holding your funds.
2. Send written notice to the funeral home and the trustee indicating you are cancelling the preneed contract. Keep copies.
3. The trustee will process the refund — all principal and earned interest — as soon as reasonably possible after receiving notice.
4. You do not need the funeral home's agreement to cancel a revocable contract. If they attempt to penalize you or delay the refund without legal basis, that is a violation of Nevada law.

If the contract is irrevocable, you generally cannot cancel it. If there are extraordinary circumstances — such as the funeral home being unable to provide the agreed services — consult a Nevada attorney about whether the irrevocable designation can be challenged.

Questions to Ask Before Signing a Preneed Contract

• Is the seller licensed with the Nevada Commissioner of Insurance?
• Which bank or trust company holds the funds?
• Can you receive an annual accounting statement showing your trust balance?
• Is the contract revocable or irrevocable — and if irrevocable, why is that being recommended?
• What percentage of your payments goes to the trust versus the seller's commission?
• What happens to the contract if you move out of Nevada?
• Are the prices guaranteed, or can the funeral home charge more at the time of death?

The Nevada Funeral Laws & Consumer Rights Guide includes a preneed contract review checklist and a summary of your cancellation rights — so you know exactly what you agreed to and what your options are if your circumstances change.

The Bottom Line on Nevada Prepaid Funeral Plans

Nevada's preneed trust laws are genuinely consumer-protective. The money you pay is held in a regulated trust, not floating in the funeral home's operating account. If they go bankrupt, your money comes back. If you cancel a revocable contract, your money — plus interest — comes back.

The weak points are: irrevocable contracts that lock funds away permanently unless terms are precisely right for Medicaid purposes, and installment agreements where the 40% damage cap still means you can lose a significant portion if you default late in the contract. Read the contract carefully, understand which type you are signing, and keep your annual trust statements so you can verify the money is where it is supposed to be.

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