How preneed trust earnings and insurance commissions affect a funeral home’s earnings and value

Owners usually think of preneed as a liability: money taken today for a funeral delivered years from now. It is also an earnings line. A firm that sells insurance-funded preneed collects commissions, and a firm with trust-funded contracts may retain part of each deposit or draw some trust income. In a sale, each of these is treated differently.

This page is about those income streams. How much a backlog is underfunded is covered in our guide to preneed shortfalls and the purchase price, and the choice between funding methods is in our comparison of trust-funded and insurance-funded preneed.

What income does a preneed program produce before anyone dies?

Up to four streams: commissions from the insurer, any portion of a deposit the law lets the seller keep, trust income the law lets the seller draw, and growth that is realized only when the funeral is performed. Only the first two usually show up as cash soon after the sale.

State law sets the second and third streams. Oregon lets the provider keep 10% of each payment on a guaranteed contract, with undistributed earnings going to the provider on guaranteed contracts under ORS Chapter 97. South Carolina’s preneed statute requires all earnings to accrue to the trust except that the provider may withdraw 10% of annual earnings for administration. Nebraska § 12-1114 requires the seller to keep in trust income equal to trust principal times the year’s increase in the national Consumer Price Index before any income may be distributed. Check your state page before assuming any of these apply to you.

How large are preneed commissions at the public companies?

Large enough that both public consolidators report them separately. They are a material, high-margin source of funeral profit.

SCI’s fiscal 2025 Form 10-K defines general agency revenue as commissions from third-party life insurers on policies sold to fund preneed arrangements, with the rate depending on product type, payment terms, and the insured’s age and health. GA revenue was $292.1 million in 2025, $230.9 million in 2024, and $185.6 million in 2023. SCI recognizes it as funeral revenue when the insurance purchase is completed and expenses selling costs as incurred. Its 2025 consolidated funeral revenue was $2,405.5 million, so commissions were about 12% of it. SCI also says commissions help it grow preneed “in a cash flow neutral manner” by offsetting sales compensation, and it excludes GA revenue from its average revenue per service.

Carriage’s fiscal 2025 Form 10-K reports $9.6 million of preneed funeral commission income, up 51%, as insurance-funded contracts sold grew about 27%. Its funeral “other” line, which it describes as preneed insurance commissions and earnings from delivered preneed trust and insurance contracts, produced $17.8 million of revenue and $15.1 million of adjusted operating profit. That is roughly an 84% margin, against 39.5% on core funeral operations.

How are trust earnings recognized?

Mostly at the funeral, not when they accrue. Public companies defer them; small firms on cash-basis books often record only what the trustee distributes.

SCI explains that it keeps any funds above the required trust deposit for working capital, but defers the related revenue until the goods and services are delivered. Earnings held in trust sit in deferred receipts on its balance sheet until maturity.

Carriage shows the effect per case. It reports average revenue per contract of $5,763 excluding preneed funeral trust earnings and $5,924 including them. The $161 difference, about 2.8%, is what trust growth adds to each funeral. When you compare your average revenue per call to Carriage’s, say which figure you used.

Do buyers capitalize commission income or exclude it?

They capitalize it only when it looks like a durable part of operations. Three questions decide it: is it steady, is it net of the cost to earn it, and will it continue after closing?

Steady. Buyers look at three years of insurer statements. A spike from a one-time seminar campaign is normalized down. A dedicated counselor producing a consistent number of contracts supports counting the stream.

Net. Most commissions are partly paid out to the counselor or agent. Buyers count only what is left.

Transferable. A consolidator usually has a preferred insurer. SCI’s 10-K notes that it changed its preferred U.S. preneed insurer in July 2024 and later reported higher commission rates. Your book of issued policies stays with your insurer, but future commissions may come under a different contract. Commissions paid to the owner personally under an individual agent license are a separate issue our guide to funeral home add-backs covers.

Trust income is handled differently. When the buyer runs the Preneed Reconciliation Ladder, the third rung verifies funding values to current trust statements, so retained earnings already raise the funded value. Paying a multiple on distributed income as well would count those dollars twice.

What mistakes do owners make with preneed income?

Most come from mixing preneed income into ordinary revenue so that no one, including the owner, can see it. The cleanup is cheap if it starts a year or more before a sale.

1. Counting gross commissions as profit. The counselor’s share, the marketing that generated the leads, and any travel or seminar costs belong against the commission. A buyer will net them out whether you do or not.
2. Booking trust withdrawals as revenue without checking the limit. A distribution above what state law allows is not income; it is money a regulator or a buyer may require you to put back. The withdrawal rules in South Carolina and Nebraska above show how different the limits can be.
3. Ignoring the year a large campaign ran. One strong year of preneed seminars inflates commissions, and buyers average it away. Showing the campaign cost next to the result keeps your credibility.
4. Leaving the license question unanswered. If commissions flow to the owner’s personal agency, decide before marketing whether a successor agent at the firm will hold the appointment.
5. Treating policy growth as a separate earnings line. The increasing death benefit on an insurance-funded contract is already part of the revenue recorded when that funeral is performed.

How should a seller present preneed income before a sale?

Separately, with paper behind every number. A buyer’s accountant will pull this apart in a quality of earnings review, so do it first.

A preneed program that produces steady net commissions is worth building; our guide to building a preneed program buyers value covers how. The valuation hub links the rest of the earnings and pricing guides.