Which statement about the revocation fee for a preneed trust accurately reflects the rule?

Which statement about the revocation fee for a preneed trust accurately reflects the rule?

• A. 4% of corpus
• B. 4% of total trust balance
• C. 10% of corpus
• D. 10% of total trust balance

Answer: (C)

The rule hinges on how the revocation fee is calculated for a preneed trust. When a preneed contract is revoked, the fee is a percentage of the corpus—the original amount funded into the trust—not of the current market value or total balance of the trust. The specified percentage is ten percent, applied to the corpus. This approach keeps the fee predictable and tied to what was initially placed into the trust, rather than fluctuating with investment gains or losses. For example, if the corpus was $5,000, the revocation fee would be $500, and the remaining $4,500 would be returned or allocated per the contract terms. The options that base the fee on a smaller percentage or on the total trust balance don’t match how the rule is defined, since the revocation cost is not tied to current balance or earnings.

The rule hinges on how the revocation fee is calculated for a preneed trust. When a preneed contract is revoked, the fee is a percentage of the corpus—the original amount funded into the trust—not of the current market value or total balance of the trust. The specified percentage is ten percent, applied to the corpus. This approach keeps the fee predictable and tied to what was initially placed into the trust, rather than fluctuating with investment gains or losses.

For example, if the corpus was $5,000, the revocation fee would be $500, and the remaining $4,500 would be returned or allocated per the contract terms. The options that base the fee on a smaller percentage or on the total trust balance don’t match how the rule is defined, since the revocation cost is not tied to current balance or earnings.