Tennessee Funeral Service Laws Rules & Regulations (LRR) Practice Exam

Preneed funds received by a licensed agent should be deposited in a type of account in the name of the designated trustee. What type of account is it?

1. Trust company or federally insured savings bank

2. Regular savings account

3. Equity account

4. Joint bank account

The correct answer is: Trust company or federally insured savings bank

Licensing laws and regulations in Tennessee require that preneed funds, which are money received by a licensed agent for future funeral services, be handled with a high level of accountability and security. The funds must be deposited in an account that is specifically designated to protect the interests of consumers. A trust company or federally insured savings bank is appropriate for these funds because such institutions provide a regulated environment where deposits are protected, ensuring the security of the clients' funds. This setup guarantees that the money is held in trust for the future services they are tied to, thereby protecting both the consumers and the funeral service providers from potential misappropriation of funds. Using a regular savings account, equity account, or joint bank account would not offer the same level of regulatory protection or fiduciary responsibility. Regular savings accounts may not have the same level of oversight or may be vulnerable to withdrawal by non-designated individuals. Equity accounts often pertain to investments rather than the secure holding of preneed funds, and joint bank accounts could lead to complications in terms of ownership and access to the funds. Therefore, having preneed funds deposited in a trust company or federally insured savings bank aligns with legal requirements ensuring the appropriate management and safeguarding of those funds.