Last Updated on: April 17, 2026
Reviewed by Kyle Wilson
Let’s follow this process carefully. Each step protects you
Before contacting the funeral home, pull out your life insurance policy documents and note policy type, current cash value, named beneficiaries and any existing loans or liens against the policy
Call your insurance company and ask specifically does my policy allows assignment?, what is the current cash interview? and can I do a collateral assignment for funeral purposes?
Get everything in writing. The IRS publication 525 notes that funeral home assignments may have tax implications depending on how the transfer is structured.
Not all funeral homes offer pre-need retirement arrangements. The funeral home must be licensed to offer free services in your state. Verify this through your state’s insurance department or funeral regulatory board.
Most states require funeral homes to hold a pre-need license, separate from their general funeral license.
Ask the funeral home explicitly for a collateral assignment not an absolute assignment. If they only offer an absolute assignment, consider finding another provider or using a funeral trust instead.
Your insurance company must approve and process the assignment. You will submit the complete assignment form, policy number and any required state specific forms. The processing typically takes 2 to 4 weeks.
Keep the completed assignments document separately from your policy. Give a copy to a trusted family member so they know what’s already covered and what is not.
Customized Options Await
Feature | Absolute Assignment | Collateral Assignment |
Who owns the policy? | Funeral home (permanently) | You (temporarily) |
Who gets leftover proceeds? | Funeral home keeps everything | Your beneficiaries |
Can you change your mind? | No — it’s permanent | Usually yes, if irrevocable terms allow |
Risk to your family | High — if policy > funeral cost | Low — protected amount stays with family |
Common in pre-need planning? | Sometimes pushed by funeral homes | Recommended by financial advisors |
Best for | Policies equal in value to funeral cost | Any policy larger than the funeral cost |
Never do an absolute assignment unless the policies face value equals the exact funeral cost and you have no other beneficiaries who need those funds.
Tax treatment depends on the structure.
Under IRS guidelines, if the funeral home uses life insurance proceeds to pay for qualifying funeral expenses, those amounts are generally not included in the deceased’s gross estate for income tax purposes. However
Always speak with the tax advisor before completing any assignment. The IRS does not offer a universal exemption, the details of your specific arrangements determine the tax outcome.
Transferring a life insurance ownership to a funeral home can be a very smart, good act. It removes financial burden from your family during one of the hardest moments of their lives.
But the type of transfer you choose determines whether your family is protected or you left with nothing from a policy they counted on.
The rule is very simple, collateral assignment over absolute assignment, always verify the funeral homes licensing and never sign before your insurance company processes the paperwork.
At Burial Senior Insurance, our licensed advisor helps the people understand their life insurance options including how to structure preneed assignments the right way.
If you have questions about your current policy I want to compare the options before committing, you can start with no pressure policy review. No sales pitch, just clear answers. If you have questions about your current policy I want to compare the options before committing, you can start with no pressure policy review. No sales pitch, just clear answers.
You usually cannot directly transfer a life insurance policy to a funeral home. Instead, you can assign the funeral home as a beneficiary or set up an irrevocable assignment where the funeral home is paid from the policy proceeds after death.
In most places, no. A few more typically not allowed or intended to be a policy owner. However they can be listed as a beneficiary or receive payment through an assignment agreement tied to funeral services.
Yes life insurance generally covers death regardless of cause, including Parkinson's disease disease, as long as policy is active.
Yes in many cases you can transfer ownership through a process called an ownership change assignment. The new owner then controls premium payments, beneficiary changes and policy decisions.
Senior Writer & Licensed Life Insurance Agent
Iqra is a dynamic and insightful senior writer with a passion for life insurance and financial planning. With over 8 years of hands-on experience in the insurance industry, Iqra has earned a reputation for delivering clear, actionable advice that empowers individuals to make informed decisions about their financial future. At Burial Senior Insurance, she not only excels as a licensed insurance agent but also as a trusted guide who has successfully advised over +1500 clients, helping them navigate the often complex world of life insurance and annuities. Her articles have been featured in top-tier financial publications, making her a respected voice in the industry.
Burial Senior Insurance provides information and services related to burial insurance for senior citizens, including policy options and end-of-life support services.
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