California Funeral Director License Practice Exam

What percentage is charged as a revocation fee for preneed trusts?

1. 5% of the corpus

2. 10% of the corpus

3. 15% of the corpus

4. 20% of the corpus

The correct answer is: 10% of the corpus

The revocation fee for preneed trusts in California is set at 10% of the corpus. This percentage is established to provide a uniform guideline that helps to ensure fairness and transparency in the management of preneed funds. The revocation fee is a financial measure that compensates the trust for any administration or potential losses incurred during the management of the funds as they are retained until needed for the services specified. When a preneed contract is revoked, the trust must still manage and maintain the investments that were allocated for the contract. The 10% fee allows the trust to cover these administrative costs while also serving as a deterrent against hasty cancellations. Understanding this percentage is crucial for professionals in the funeral industry, as it reflects not only legal requirements but also industry practices related to financial management of preneed agreements.