TEXAS FUNERAL PREARRANGEMENT
LICENSE EXAM 2026/2027 ACTUAL
QUESTIONS WITH VERIFIED ANSWERS &
COMPLETE RATIONALES
**1. Under Texas Finance Code §154.151, a preneed contract
funded by a trust must designate the trust's remainder beneficiary
as:**
A. The funeral home's owners
B. The contract purchaser or the purchaser's estate
C. The Texas Department of Banking
D. The sales agent of record
**Correct answer:** The contract purchaser or the purchaser's
estate
**Rationale:** The remainder beneficiary—who receives excess
funds after funeral performance—is the purchaser or their estate,
not the funeral provider. This protects consumer interests in trust-
funded contracts .
---
,**2. Prepaid funeral benefits contract forms must be approved
by:**
A. The Texas Funeral Service Commission
B. The Texas Department of Insurance
C. The Texas Department of Banking
D. The Federal Trade Commission
**Correct answer:** The Texas Department of Banking
**Rationale:** The Texas Department of Banking (TDB) has
regulatory authority over prepaid funeral benefits contracts in
Texas. All contract forms must be approved by the TDB before
use .
---
**3. A prearrangement licensee changes the name of their funeral
home from "Smith Funeral Home" to "Smith Family Memorials"
but keeps the same tax ID and location. TFSC must be notified
within:**
A. 10 days
B. 15 days
,C. 30 days
D. 60 days
**Correct answer:** 30 days
**Rationale:** TAC §203.9 requires notification of any assumed
name or DBA change within 30 days. This ensures regulatory
records remain current .
---
**4. A preneed trust funded with $10,000 invests in a speculative
tech stock. The stock loses 60% of its value. The funeral home's
liability is:**
A. $6,000 to the trust
B. Zero; investment risk is on the beneficiary
C. Replacement of the full $10,000
D. 50% of the loss, split with trustee
**Correct answer:** Zero; investment risk is on the beneficiary
**Rationale:** Unless the funeral home acted as trustee or
directed the investment, risk belongs to the contract purchaser.
, The funeral home is not liable for investment losses in a properly
structured trust .
---
**5. A funeral prearrangement life insurance agent must be
supervised by:**
A. Any licensed funeral director
B. A legal reserve life insurance agent whose company holds a
seller's permit
C. The Texas Department of Banking
D. The funeral home owner
**Correct answer:** A legal reserve life insurance agent whose
company holds a seller's permit
**Rationale:** Texas law requires that a funeral prearrangement
life insurance agent be supervised by a legal reserve life
insurance agent whose company holds a valid seller's permit.
This ensures proper oversight of insurance-funded preneed sales
.
---
LICENSE EXAM 2026/2027 ACTUAL
QUESTIONS WITH VERIFIED ANSWERS &
COMPLETE RATIONALES
**1. Under Texas Finance Code §154.151, a preneed contract
funded by a trust must designate the trust's remainder beneficiary
as:**
A. The funeral home's owners
B. The contract purchaser or the purchaser's estate
C. The Texas Department of Banking
D. The sales agent of record
**Correct answer:** The contract purchaser or the purchaser's
estate
**Rationale:** The remainder beneficiary—who receives excess
funds after funeral performance—is the purchaser or their estate,
not the funeral provider. This protects consumer interests in trust-
funded contracts .
---
,**2. Prepaid funeral benefits contract forms must be approved
by:**
A. The Texas Funeral Service Commission
B. The Texas Department of Insurance
C. The Texas Department of Banking
D. The Federal Trade Commission
**Correct answer:** The Texas Department of Banking
**Rationale:** The Texas Department of Banking (TDB) has
regulatory authority over prepaid funeral benefits contracts in
Texas. All contract forms must be approved by the TDB before
use .
---
**3. A prearrangement licensee changes the name of their funeral
home from "Smith Funeral Home" to "Smith Family Memorials"
but keeps the same tax ID and location. TFSC must be notified
within:**
A. 10 days
B. 15 days
,C. 30 days
D. 60 days
**Correct answer:** 30 days
**Rationale:** TAC §203.9 requires notification of any assumed
name or DBA change within 30 days. This ensures regulatory
records remain current .
---
**4. A preneed trust funded with $10,000 invests in a speculative
tech stock. The stock loses 60% of its value. The funeral home's
liability is:**
A. $6,000 to the trust
B. Zero; investment risk is on the beneficiary
C. Replacement of the full $10,000
D. 50% of the loss, split with trustee
**Correct answer:** Zero; investment risk is on the beneficiary
**Rationale:** Unless the funeral home acted as trustee or
directed the investment, risk belongs to the contract purchaser.
, The funeral home is not liable for investment losses in a properly
structured trust .
---
**5. A funeral prearrangement life insurance agent must be
supervised by:**
A. Any licensed funeral director
B. A legal reserve life insurance agent whose company holds a
seller's permit
C. The Texas Department of Banking
D. The funeral home owner
**Correct answer:** A legal reserve life insurance agent whose
company holds a seller's permit
**Rationale:** Texas law requires that a funeral prearrangement
life insurance agent be supervised by a legal reserve life
insurance agent whose company holds a valid seller's permit.
This ensures proper oversight of insurance-funded preneed sales
.
---
