New Hampshire Preneed Funeral Contracts: Rules, Risks, and Medicaid Traps

Prepaying your funeral feels like a responsible act — it locks in today's prices, relieves your family of decision-making under grief, and can serve as a legitimate Medicaid planning tool. In New Hampshire, all of that is true. But the legal framework governing preneed contracts also contains structural gaps that have cost consumers thousands of dollars. Understanding those gaps before you sign is the point.

How Prepaid Funeral Money Is Held

When you prepay for funeral goods and services in New Hampshire, the funeral home cannot simply deposit your money into its operating account. RSA 325:46-a requires the funds to be secured in one of two ways: placed in a state-regulated third-party funeral trust, or used to purchase a specialized preneed life insurance policy designed to pay the funeral provider directly upon your death.

The trust or insurance vehicle is supposed to protect your funds if the funeral home changes ownership, closes, or goes bankrupt. That protection has real limits in New Hampshire, discussed below — but the requirement to segregate funds is the baseline.

Revocable vs. Irrevocable Contracts

This distinction matters enormously and is often glossed over during the sales conversation.

Revocable contracts let you cancel at any time. Under RSA 325:46-a, you provide written notice of cancellation to both the funeral home and the third-party trustee. The cancellation takes effect 15 days after that notice. You get back your principal and accrued interest, minus any legitimate administrative expenses the trustee is entitled to deduct. Read the contract carefully — some revocable contracts include cancellation penalties that can significantly reduce the refund.

Irrevocable contracts cannot be canceled and the funds cannot be returned to you. They exist almost exclusively for Medicaid planning purposes. New Hampshire Medicaid classifies an irrevocable funeral trust as an exempt asset — it does not count toward the $2,500 personal asset limit that applies when determining Medicaid eligibility for long-term care. New Hampshire places no statutory cap on the amount that can be held in an irrevocable funeral trust, provided the contract is accompanied by a sufficiently detailed Goods and Services statement specifying exactly what will be provided.

The irrevocability cuts both ways. If you move to another state or simply change your preferred funeral home, you cannot get your money back. What you do have is the right of portability — RSA 325:46-a (III) guarantees you the absolute right to transfer your irrevocable contract to a successor funeral home if you relocate or change your preference. The receiving funeral home must accept the transfer. This is a critical protection that families frequently don't know exists.

The Medicaid Excess Funds Trap

If you purchase a guaranteed-price preneed contract and the trust investments perform well, the balance at the time of death may exceed the actual retail cost of the funeral services delivered. Under RSA 325:46-a, the funeral home must refund that surplus to your estate — they cannot keep it.

Here is where families get blindsided: if you were a Medicaid long-term care recipient, that refund goes straight to the New Hampshire Department of Health and Human Services under the state's estate recovery program. Because the state holds a lien against your estate for the cost of nursing home care, the surplus preneed funds are intercepted before they reach your heirs. The family expects a windfall refund; instead the state absorbs it. The funeral home fulfilled its legal obligation — the funds just didn't end up where the family assumed they would.

If Medicaid planning is part of your reason for setting up a preneed contract, the contract needs to be sized carefully. A detailed Goods and Services statement that accurately reflects the planned funeral minimizes the likelihood of a large surplus.

The Guaranty Fund Problem

New Hampshire has no statutory Preneed Consumer Guaranty Fund. Many states require a small percentage of every preneed sale to flow into a state-administered restitution account that reimburses consumers if a funeral home misappropriates trust funds or declares bankruptcy. New Hampshire maintains no such safety net.

This is not a theoretical risk. Nationally, funeral home insolvencies and trust fund misappropriations occur regularly. The New Hampshire Funeral Directors Association has historically made voluntary efforts to assist defrauded consumers, but that assistance is neither legally mandated nor guaranteed — especially if the defaulting funeral home was not an NHFDA member in good standing.

Practical implication: before signing any preneed contract, verify the identity and standing of the third-party trustee (it should be a bank or regulated financial institution, not an account controlled by the funeral home), confirm that the trust account is properly titled in your name or as an irrevocable trust, and keep a copy of all trust documentation separate from the contract paperwork.

Portability in Practice

If you signed an irrevocable preneed contract years ago and now want to move your arrangements to a different funeral home, the process is straightforward in principle:

1. Notify your current funeral home in writing that you are exercising your portability right under RSA 325:46-a (III).
2. Identify the receiving funeral home.
3. The trustee transfers the funds directly to the new funeral home's trust account.
4. A new contract is drawn up reflecting the current goods and services.

What frequently happens in practice is that the original funeral home resists the transfer — claiming administrative complications, disputing the trust balance, or simply being slow. RSA 325:46-a gives you the right. If resistance persists, a complaint to the OPLC Board is the appropriate escalation.

Alternatives to Consider

A preneed funeral trust is not the only mechanism for Medicaid spend-down. Other exempt assets include one home (subject to equity limits), one vehicle, and personal property of reasonable value. Before committing to an irrevocable funeral trust, it is worth reviewing the full picture of allowable Medicaid spend-down options with an elder law attorney — especially in light of New Hampshire's aggressive expanded estate recovery rules, which can reach assets held in revocable living trusts created after July 1, 2005.

The New Hampshire Funeral Laws & Consumer Rights Guide includes a checklist for evaluating preneed contracts before you sign, with specific questions to ask about trust segregation, portability terms, and guaranteed vs. non-guaranteed pricing.

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