SI CHI01130.423 Ohio Prepaid Burial Contracts (RTN 378 -- 10/2005)

A. General

Ohio distinguishes between pre-need funeral contracts and pre-need cemetery merchandise and service contracts. A pre-need funeral contract is "a written agreement, contract or series of contracts" to sell or provide funeral services, goods or any combination to be used for the funeral or final disposition of a deceased individual. Payment may be made outright or on an installment basis prior to the death of the purchaser or the person for whom the services or merchandise have been purchased. A funeral contract that includes funeral services may be sold only by a funeral director licensed under Chapter 4717 of the Ohio Revised Code. A pre-need funeral contract may be revocable or irrevocable. All money prepaid for funeral goods and services is held in trust for the benefit of the person for whom the contract is made.

A pre-need cemetery merchandise and services contract is "a written agreement, contract, or series of contracts" to sell or provide "an outer burial container, monument, marker, urn, other type of merchandise customarily sold by cemeteries, or opening and closing services" provided in connection with the final disposition of a deceased individual. Payment for the merchandise or opening and closing services may be made outright or on an installment basis, prior to the death of the purchaser or the person for whom the merchandise or services were purchased. A pre-need cemetery merchandise and services contract does not include any pre-need funeral contract or any agreement or contract pertaining to the sale of a burial lot, burial, interment or entombment right or any rights with respect to an endowment care trust. A pre-need cemetery merchandise and services contract may be revocable or irrevocable. For such contracts, the greater of 110% of the seller's actual cost or 30% of the seller's retail price of the merchandise, and 70% of the seller's retail price for the services to be provided under the contract shall remain intact as a fund until the death of the person for whose benefit the contract was made or until the merchandise is delivered.

B. Types of Contracts

1. Revocable

a. Pre-need Funeral Contracts

Within seven days of establishment of a pre-need funeral contract, regardless of whether the contract is revocable or irrevocable (see B.2.a), the purchaser may rescind the contract and request and receive 100% of the payments made under the contract. Beyond the seven day period, upon at least fifteen days' notice, the purchaser can cancel the contract and request and receive from the trustee payments made under the contract and any income earned up to the time of cancellation minus fees, distributions and expenses. However, if a contract stipulates a firm, fixed or guaranteed price for funeral services and goods for future use at a time determined by the death of the beneficiary of the contract, on not less than fifteen days' notice, the purchaser may cancel the contract and receive:

  • 90% of the principal paid,

  • not less than 80% of any interest earned up to the time of cancellation, and

  • not less than 80% of any income earned on the funds up to the time of cancellation minus fees, distributions and expenses.

The remaining funds are distributed to the seller. If more than one purchaser is involved in the contract, all of them must request cancellation.

See SI 01130.425 for instructions on the treatment of revocable funeral contracts for SSI purposes.

b. Pre-need Cemetery Merchandise and Services Contracts

Within seven days of establishment of a pre-need cemetery merchandise and services contract, the purchaser may rescind the contract and request and receive 100% of the payments made under the contract. Beyond the seven days, a person who has entered into such a contract may, upon not less than fifteen days' notice, cancel the contract and request and receive from the seller 60% of the payments made under the contract up to the time of cancellation. However, if the contract stipulates a firm, fixed or guaranteed price for the goods and services to be used in the future upon the death of the person for whom the contract was made, and if the goods have not been delivered or the services not provided, on not less than fifteen days' notice, the purchaser may cancel the contract and receive:

  • 60% of the principal paid;

  • not less than 80% of any interest paid up to the time of cancellation; and

  • not less than 80% of any accrual or income earned while the money was held in trust.

All remaining moneys are paid to the seller. If more than one purchaser is involved in the contract, all