Illustrative example: a funeral home and cemetery sold to a regional family group

Everything on this page is an illustrative composite, not a real client deal. We combined patterns from many family combination operations, invented the figures, and rounded them so the arithmetic can be checked. No town, family, or buyer here is real.

The business is a funeral home with an adjoining 28-acre cemetery in a small town in the Mid-Atlantic region. The founder’s grandson, 64, owns both through one company. His daughter manages the cemetery and wants to keep doing so. The buyer that emerged was a regional family group with seven funeral homes and no cemeteries of its own.

What did the combination look like before the sale?

Two businesses sharing one owner, one staff, and one set of equipment. The funeral home served 265 families a year; the cemetery handled 74 interments and sold 96 spaces.

After documented add-backs and a market salary for a manager to replace the retiring owner, the funeral home’s adjusted EBITDA was $331,000, a 17.2% margin. The high burial share is no accident: an owned cemetery next door keeps burial families close.

Why is perpetual care money not the cemetery’s profit?

Because deposits into the fund are restricted and only the fund’s income, not its principal, normally supports maintenance. The fund is a liability-matching reserve, not a bank account for the owner.

SCI’s FY2025 Form 10-K describes the same structure at scale: the required portion of interment-right proceeds placed in perpetual care trusts is not recognized as revenue, and the principal generally cannot be withdrawn. That is why the 12% deposit was subtracted above before anything counted as sales.

Deposit rates vary by state. Ohio, for example, requires a cemetery to place not less than 10% of the gross sales proceeds from burial lots and similar rights into its endowment care trust, under Ohio Revised Code 1721.21. The 12% used here is an assumption for the illustration.

The care gap is what the buyer studied most:

• Annual care cost (grounds labor $118,000 + equipment and fuel $27,000): $145,000
• Fund income: $47,090, about a third of that cost
• Gap carried by operations: $145,000 − $47,090 = $97,910 a year
• Selling horizon: about 2,900 developed spaces ÷ 96 a year = roughly 30 years, plus 17 undeveloped acres

Our definition of a perpetual care fund covers how these funds are built and audited.

How did each half of the business get its own value?

The funeral home was priced on adjusted EBITDA, the cemetery on EBITDA after a reserve for roads, walls, and future development, and the building by appraisal. All multiples below are assumptions for this example, not market data.

The cemetery’s reserve was set at $30,000 a year, bringing its earnings to $205,742 − $30,000 = $175,742.

The cemetery’s lower range reflects a finite inventory and a care duty that lasts forever. Our side-by-side on a funeral home with a cemetery vs. a standalone firm explains how buyers think about the combination premium. The building was valued separately, the approach covered in our guide to valuing funeral home real estate.

What did diligence find in the perpetual care fund?

Missed deposits. The buyer’s accountant traced every interment-right sale for five years to a trust deposit and found $46,000 that never arrived, from installment sales in three earlier years.

The seller cured it before closing: $46,000 of principal plus an assumed $5,000 of lost earnings, $51,000 in total. Curing early mattered because the fund itself had to change hands with regulatory involvement. In Kansas, for instance, K.S.A. 17-1311 requires the cemetery to obtain prior written approval from the Secretary of State before its trust instrument is terminated, transferred, or amended. In Florida, Fla. Stat. 497.264 makes a cemetery license non-transferable and requires an acquirer to apply for and obtain approval before buying control. Those two statutes are examples, not this firm’s state; the point is that some form of approval was likely, so the purchase agreement made it a closing condition. Rules differ widely by state, so confirm your own with the regulator and counsel early.

Why did a regional family group fit this sale?

It could run a cemetery it did not have, keep the family’s daughter in her role, and absorb back-office work across seven other firms. A public consolidator had shown interest in the funeral home alone. That offer would have left the family holding a cemetery with a $97,910 care gap and no funeral home feeding it burials, a much harder asset to sell later. Keeping the two together protected the cemetery’s value as well as the family’s role in it.

The family ranked its priorities before any offer arrived, then scored each buyer’s promises with the Legacy Terms Ledger. Three terms were written into the asset purchase agreement:

1. Name on the funeral home and cemetery gates for at least ten years, binding on any later buyer.
2. Cemetery manager role for the owner’s daughter, at current pay, for at least three years.
3. Family section care: the group agreed in writing to maintain the founders’ section to the existing standard.

How groups like this one underwrite and finance a purchase is covered on our page about the regional family group as a buyer.

How was the deal structured, and what did the family net?

The group paid $2,690,000 at closing and gave the seller a $300,000 note over five years at an assumed 7% interest, about $5,940 a month. After debt, costs, the trust cure, and estimated taxes, the family keeps about $1,730,400.

Allocation follows the Form 8594 instructions, which place “property held by the taxpayer primarily for sale to customers” in Class IV. That is how the developed, unsold spaces were treated, so their gain is ordinary income. The undeveloped acreage was treated here as a capital asset, a call the seller’s CPA should make. Tax rates are assumptions: 35% ordinary, 20% capital gain, 25% unrecaptured section 1250 gain, and 5% state.

We taxed the whole gain in the year of sale to keep the math conservative. Under IRS Publication 537, installment reporting may defer tax on part of the note’s share of gain, though recapture is still taxed in the year of sale. Our guide to taxes on selling a funeral home goes further.

What is the lesson of this combination sale?

Price the cemetery on what it will cost to care for forever, not on this year’s sales, and clean up the fund before a buyer audits it. The $51,000 cure was cheaper than the price discount an unreconciled fund would have drawn.

More of these mechanics are in our guide to selling a funeral home with a cemetery, and the full valuation method is on our valuation hub.