Death Care Compliance Law

Death Care Compliance Law

Preneed: A Pandora's Box of Problems

William Stalter is the founder of Stalter Legal Services and the Preneed Resource Company. Bill focuses his law practice on preneed and death care compliance, serving banks, funeral homes, crematories, and cemeteries. He has written multiple published articles

Missouri Financial Exam Documents: Insurance Policies

Posted in Uncategorized

The financial examination records sought by the Missouri State Board of Embalmers and Funeral Directors two bullet points directed at insurance funded arrangements:

  • A current statement from any/all applicable insurance companies with which you have insurance-funded preneed contracts for each active preneed contract
  • A current listing of any other insurance assignments which require insurance funded preneed contracts that are not included in the above bullet

The first bullet point seeks the statements provided by such companies as Homesteaders, Forethought and National Guardian Life, where the preneed seller has a contractual relationship with the insurance company.

The second bullet point seeks a listing of the insurance policies where the consumer has made the funeral home the beneficiary of a pre-existing policy, often is a spend-down situation.  To comply with this request, the seller could update and provide the Excel worksheet used for the annual report.  (Contact us for an Excel template for this purpose.)

Missouri Exam Documents: Trustee Records

Posted in Compliance, Exams/audits, Recordkeeping

In a prior post, we listed the records sought by the Missouri State Board of Embalmers and Funeral Directors when an examination is scheduled against a preneed seller.  In this post we will look at the five bullet points that involve the preneed trustee:

  • A current statement from your state or federally chartered financial institution/s authorized to exercise trust powers in Missouri of any preneed trust account/s that you have identifying the payments, earnings, and distributions for each active preneed contract
  • A copy of a ledger or computerized report showing all outstanding preneed contracts, including consumer addresses, if available
  • Total payments and applicable payment dates on preneed contracts, if available (not necessary for payments on insurance funded preneed contracts)
  • A copy of the trust agreement with the financial institution for any preneed trusts
  • A blank preneed contract currently used by you as a seller

To an extent, these record requests are overlapping, and some of the wording is pulled directly from the statute.  Therefore, the request may be confusing to some funeral homes.

The first bullet point is almost a trick question.  The State Board is not only requesting a trustee statement that reflects trust payments, earnings and distributions, but also some form of documentation of the trustee’s authority to provide fiduciary services in Missouri.  Sellers can comply with the main part of this bullet point by providing a purchaser report produced by the trustee that lists the individual purchasers, their address, contract sales price, total payments, deposit balance, ‘account value’ and distributions for sales expense and origination fees.  If the purchaser report summarizes the trust information, it will also help cover the second and third bullet points.   We italicize account value because trust “earnings” is ambiguous term.   What the Board has sought in the past is the trust’s market value.  The main purpose of Senate Bill No.1 is to ensure a trust if properly funded, and an audit cannot assess a trust without knowing its value.

The first bullet point is also tricky in that it seeks the distributions made from an active contract.  The only distributions that a trustee would make with regard to an active contract are any 10% sales expense or 5% origination fees reimbursed back to the seller.  Consequently, the purchaser report should reflect any sales expense or origination fees paid the seller.

The State Board also requests payment dates on the individual accounts, if available.  This can be difficult information to provide for preneed contracts that are paid for installments.  Our office generally offers to provide payment reports on a sampling of contracts if such a request is made by the Board.

The State Board is also seeking the trustee’s legal documents: trust agreement, preneed contract form and a document reflecting the trustee’s authority to serve in Missouri.  With regard to the latter item, banks and trust companies must obtain authority to provide fiduciary services.  For state chartered trustees that are not based in Missouri, that may mean two sets of documents.  For preneed trusts that have independent fund managers or third party administrators, the trustee may also be required to provide related agreements.

Round 2 of Missouri’s Preneed Exams: The Document Request

Posted in Exams/audits, Missouri - SB1

It has been more than a year since the Missouri State Board of Embalmers and Funeral Directors approved the expansion of the scope of financial examinations.  Consequently, preneed sellers up for their second preneed audit are receiving notices that request the following reports and documents:

  • A current statement from your state or federally chartered financial institution/s authorized to exercise trust powers in Missouri of any preneed trust account/s that you have identifying the payments, earnings, and distributions for each active preneed contract
  • A current statement from any/all applicable insurance companies with which you have insurance-funded preneed contracts for each active preneed contract
  • A current listing of any other insurance assignments which require insurance funded preneed contracts that are not included in the above bullet
  • A current statement from your financial institution/s of preneed joint account/s for each active preneed contract
  • A current statement from any other sellers reflecting contracts listing you as provider
  • For any joint accounts, an attestation from each bank that the accounts are under joint control of the seller and consumer
  • A copy of a ledger or computerized report showing all outstanding preneed contracts, including consumer addresses, if available
  • Total payments and applicable payment dates on preneed contracts, if available (not necessary for payments on insurance funded preneed contracts)
  • Copies of agreement(s) with providers, if any
  • A copy of the trust agreement with the financial institution for any preneed trusts
  • A blank preneed contract currently used by you as a seller
  • Written policy regarding retention of records, if available
  • Written policy regarding cancelled and transferred contracts, if available
  • Explanation of sequential numbering system for preneed contracts
  • A report showing all contracts that have been canceled transferred or fulfilled since your previous exam.

We will address some of the requests in greater detail in future posts.

Missouri HB 1062: A Super Trust for the NPS Recovery

Posted in Legislation, NPS/Lincoln

It has been almost 2 years to the date when a $391 million dollar judgment was entered against PNC Bank, as the successor to Allegiant Bank.   Allegiant Bank was one of the last trustees to administer National Prearranged Services’ preneed trusts in Missouri.  PNC Bank appealed that judgment, and a decision is expected any day from the Federal Court of Appeals.  Anticipating that PNC Bank will lose its appeal, a bill has been filed in the Missouri Legislature that would establish a super trust for the administration of the damages to be paid by PNC Bank.

Click the following hyperlink to access HB 1062.

Transition Plans: Family Support

Posted in Power of Attorney, Transition Documents

The Kansas City Star recently devoted a column to Marty Schottenheimer, and his family’s support as he adjusts to life with Alzheimer’s.   Coach Schottenheimer was diagnosed with the disease in his late 60’s, but continues an active life, with the assistance of his wife, son, and daughter-in-law.  The column is a reminder that multiple family members often play a supportive role as health and cognitive abilities start to become an issue.  We like to believe that estate planning needs have been addressed when we execute powers of attorneys in favor of our spouse.  But, as Marty’s story suggests, children often serve a supporting role as well.  Consequently, multiple powers of attorney documents may be needed, and frequently, with children serving different roles.  One child may be better suited for assisting with financial issues, and another for health care issues.

Estate Planning and Funeral Arrangements: A Will will be too Late

Posted in Preplanning, Right of Sepulcher, Transition Documents

Funeral and burial preplanning should be a part of every estate plan, but some web pages promoting estate planning can be misleading or impractical.   The estate planning page sponsored by Lawyers.com suggests that funeral arrangement preferences can be incorporated into a will or health care power of attorney to alleviate the financial and emotional burdens suffered by survivors.   That advice, though, does not reflect the realities faced by the surviving family members.   Funeral arrangement decisions must be made within days, or even hours of the death.   A will may not be accessible for days, and then opening the probate estate to authorize the executor to care out the funeral arrangement, may take weeks.   The funeral home may also seek immediate payment, or be unwilling to file with the probate estate without additional compensation.

Our preferences about funerals and burials change, and it can become expensive to visit an attorney to amend the will when preference changes.

A power of attorney is a more practical estate planning approach, but the document would need to be coupled with a right of sepulcher that sets out the funeral and burial instructions.  The power of attorney form authorizes the agent to direct the principal’s funeral, but would not set out the funeral and burial arrangements.  Also, the power of attorney does not authorize the agent to pay the funeral bill out of the deceased’s assets.  As we have explained in a prior post, the agent’s authority to spend the principal’s funds terminates on death.  So, the estate plan will have to consider a funding vehicle such as a final expense trust.

NPR’s Stories on the Funeral Industry: On Line Shopping

Posted in Churches/Ritual, Consumer Advocates, Preplanning

NPR’s second story on the funeral industry suggests that preplanning a funeral will typically require visits to multiple funeral homes.

NPR led their story with a consumer attorney sharing his frustrations with getting price information from funeral homes near his father.  To the attorney’s surprise, many of the funeral homes did not include general price lists on their websites.  NPR discussed how the Federal Trade Commission’s Funeral Rule was intended to overcome industry secrecy by requiring the disclosure of itemized price lists.   However, the Funeral Consumer Alliance advised NPR that the Funeral Rule is antiquated because it does not require online price disclosures.  When contacted by NPR, the Federal Trade Commission reminded the reporter that the Funeral Rule was written before the Internet, and an amendment would be required to force funeral homes to post their general price lists on their websites.  What went unspoken in the story is that such an amendment is highly unlikely with the stated goals of the Trump administration.

Another reality is that it is very difficult for Mom and Pop funeral homes to administer their own websites.  Nor are the on line price comparison companies targeting the smaller communities for their services.  As the death care industry representative suggests, on line pricing disclosures are market driven, and the funeral homes in smaller towns are hard pressed to justify the cost of on line pricing disclosures.

A few months ago we posted a sample funeral planning guide for use by churches.  We found one church’s funeral planning guide more beneficial than others because it incorporated actual service costs from local funeral homes.  The guide was obviously prepared with the cooperation of the funeral homes serving that church’s congregation.  Funeral homes do understand the need to provide pricing information for preplanning efforts.

Click the following hyperlink to read NPR’s Funeral Prices are still Unclear.

The Ecclesiastical Preneed Funeral Plan: Exceptional Financial Security

Posted in Churches/Ritual

The promotional website for the Ecclesiastical Preneed Funeral Plan could easily be mistaken for that of a funeral home.  This church stresses to parishioners the need to not only plan their funeral, but to also make financial provisions for their eventual funeral expense.  The website points out that funeral costs are rising, and funding a preneed contract will enable the parishioner to fix the funeral director’s charges and ease the financial burden to their family.  And to ease their own emotional burden, parishioners can “plan their funeral in as much or as little detail as they like”.

Like other churches in England, the Ecclesiastical Preneed Funeral Program administers the parishioners’ funds until they are needed to pay the funeral director.   The inference given is that the church and the fund will be there even if the funeral home has been closed.

NPR’s Stories on the Funeral Industry: Crossing the Street can save Thousands

Posted in Consumer Advocates, Preplanning

The take away from the recent NPR stories on the funeral industry is that consumers should preplan their funerals to control costs, and if the objective is to compare funeral homes and their prices then plan to visit each prospective funeral home.

The first story reports on a widow who spent more than $7,000 on a cremation package.  The widow had never planned a funeral, and had not given thought to her husband’s arrangements until prompted by the hospital on the day of his death.  Relying on name recognition of a local funeral home, the widow and her family went to that funeral home and chose a cremation package.  NPR’s investigation found that the funeral home was controlled by a national death care company that owned several funeral homes and a cremation society in the widow’s community, and that each location offered cremation packages that were cheaper than the one purchased by the widow and her family.  NPR suggested that the widow could have saved thousands of dollars by going to one of the company’s other locations.

The story went on to advise that direct cremation services offer consumers a way to compare funeral homes’ prices, and questioned whether the different prices charged by each of the company’s funeral homes were misleading or inappropriate.  But when input was sought from an industry representative, the reporter referenced both package arrangements and direct cremation services.  The story’s shifts between direct cremations and package cremations probably clouded the issues for consumers.

The price charged for direct cremation services includes funeral home overhead and a targeted amount of profit.  Overhead can vary dramatically from funeral home to funeral home.  The same is true even for the different funeral homes owned and operated by the national death care companies.

Package arrangements also differ from funeral home to funeral home.  Funeral homes typically offer multiple package options.  Accordingly, it will be difficult for consumers to compare package arrangements to determine which funeral home is ‘cheaper’.  As the story suggests, funeral homes offer packages because consumers tend to spend more on a package than when they purchase services a la carte.   While the package is cheaper than purchasing each service and piece of merchandise a la carte, the package includes a service or a merchandise item that may not otherwise be purchased by the family.

But, the primary reason funeral homes offer packages is because families want to shorten, or even avoid, the arrangement process.   The arrangement process requires dozens of decisions at a time when the mind and heart are somewhere else.  Preplanning the funeral is the only way to avoid the stress of the arrangement process.

Here is the link to the NPR story “You can pay thousands less for a funeral just by crossing the street”.

Next we will look at NPR’s story about funeral prices are still unclear.

Church and Funeral Directors in Partnership

Posted in Churches/Ritual

We came across the Dioceses of Liverpool website some time ago when researching the income tax consequences of church sponsored preneed programs.  We had found that preneed funeral programs in England, Canada and Australia were often established and operated independent of the funeral home.  With a high cremation rate, English churches saw an opportunity to partner with funeral directors and reclaim their funeral ministry.

The Dioceses of Liverpool is not alone in having established a program to encourage parishioners to preplan, and pre-fund, funeral arrangements.  The Dioceses describes the impact of their program:

… the changes have led to something more profound for parish ministry. Funeral Directors are contacting parish clergy first to make initial funeral arrangements meaning our churches have more chance to reach out to those in need. We have to take a fresh look at our funeral ministry. It has implications for pastoral and bereavement teams, it means that more Readers are being asked to conduct funerals, it means we have to make serious efforts to work harder at funerals.

In the weeks to come, we’ll post more on church and funeral director partnerships