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 Funeral Legislation: The Funeral Consumer Board

Posted in Exams/audits, Missouri - SB1

A bill has been filed in the Missouri General Assembly that proposes to divide the State Board of Embalmers and Funeral Directors membership evenly between the public and industry representatives.  That Board currently consists of 5 industry members and 1 public member.  The bill sponsor, Representative Joe Don McGaugh, is from a district that includes Ray County, where hundreds of consumers lost preneed funds paid to Polley Funeral Home.  The Representative is of the opinion that the State Board’s industry members sat on their hands despite consumers and funeral home competitors complaints against Polley Funeral Home.  The State Board’s discipline page reflects that the Polley preneed seller license was first suspended in 2011, and quickly reinstated, only to be suspended and reinstated in following years.  After Mr. Polley was arrested on drug charges in 2015 (smoking meth in his hearse while parked in a casino lot), the Ray County prosecutor sought assistance from the Missouri Attorney General in pursuing criminal charges for preneed fraud.  By the time fraud charges were filed in 2016, the consumers’ preneed funds were gone.

In 2009, the Missouri Legislature rewrote the state’s preneed law, requiring the State Board to conduct periodic preneed audits, and granting the Board concurrent jurisdiction to pursue criminal prosecutions against funeral directors that failed to handle consumer funds appropriately.  At least one Legislator feels the State Board will take those responsibilities more seriously if consumers have an equal say.

Pastoral Undertaking: A Case for Prearranging Funerals

Posted in Churches/Ritual, Preplanning

The Calvin Institute of Christian Worship website is a good source for articles on funeral ministry, and the Conversation Project reminded us of Reverend Marc Nelesen’s post about his conversation with a congregate who had prepared for her funeral. Rev. Nelesen describes how the congregate went to great lengths to plan her funeral, and to communicate her preparedness to family, pastors and friends.  In addition to decisions about the type of funeral service and burial, the congregate had spent considerable time choosing music and bible texts to be used at her service.  But in the days that followed the congregate’ s death, her family could not find her funeral plan.  Although the congregate had purchased a prearranged funeral, her decisions about Scripture selections and hymns were not included.  As Rev. Nelesen put it:  This woman had dialoged at length with her own death, and we only heard a part of the conversation.

Rev. Nelesen goes on to discuss how important it is for congregates to have discussions with family, friends, and clergy about end of life issues.  Eventually, each individual will need to bring a trusted funeral director in the conversation to discuss funeral and burial options.  But Rev. Nelesen acknowledges that congregates, and funeral directors, may be hesitant to discuss recommendations about Scripture texts and hymns.  This is an area where clergy have an opportunity to become more proactive, and develop their own funeral ministry.  Rev. Nelesen then offers a prearrangement form  that could be maintained in the preneed file at the funeral home, where the funeral director and the family could be directed to a more detailed funeral plan at the church.  As Rev. Nelesen suggests, the funeral plan recorded with the church might be revised several times as the congregate includes family and friends into the end of life discussion.

Rev. Nelesen’s article led us to search the internet for churches that have developed funeral planning guides.  What we found were primarily intended for the surviving family members who were left to plan a service.  We did a find a few that were intended for preplanning, but most have lacked information about funeral and burial options.  Accordingly, we borrowed from a handful of the funeral planning guides to come up with this generic document.

Missouri Preneed Seller Records: More Than Adequate

Posted in Compliance, Exams/audits, Recordkeeping

The final section of the Missouri preneed seller record rule will likely draw criticism from the industry:

The standards set forth in this rule are stated only as minimum standards.  Each seller may maintain any records in addition to those set forth in this rule.  In addition, if the board determines that it is unable to fulfill its statutory duties from the records maintained by any seller, the board may request records in addition to those listed in this rule so as to complete its statutory duties.

The section seems to be acknowledging that sellers, and their funding agents, will likely create and maintain preneed records that go beyond the regulation’s requirements.  And, if the Board cannot determine compliance with Chapter 436 based on the ‘adequate records’ required by the rule, the Board may request  the records that go beyond the rule’s requirements.  The challenge that may be made is whether this section is an attempt to empower the Board to require a seller to create and maintain records that have yet to be defined.  It is foreseeable that the Board may need records regarding trust allocations or insurance payouts on non-guaranteed contracts.   Whether this section could be an overreach by the Board will depend on the facts and circumstances.

Missouri Preneed Seller Records: Format of Records

Posted in Compliance, Exams/audits, Recordkeeping

The next section of the Missouri preneed records rule provides the funeral home latitude to maintain records in either a hard paper copy or an electronic format, but so long as the records are provided to the State Board in a timely manner:

All records required to be maintained by a seller may be maintained in paper or electronic or a combination of paper and electronic formats, but shall be maintained in a manner such that the required information may be retrieved and provided to the board in a timely manner, upon request in accordance with the statutes and regulations governing the board.

Some funeral homes have not yet adopted the paperless office concept.  We have such clients, who struggle with Excel spreadsheets and PDF documents.  The proposed regulation is acknowledging those types of sellers, but warning that reliance on paper reports will still require that they be able to find, copy and deliver those reports to the State Board within a timely manner (generally within 30 days of request).

Missouri Preneed Seller Records: Communications

Posted in Compliance, Exams/audits, Recordkeeping

Missouri’s preneed seller records proposal would require preneed sellers to retain all communications that relate to their preneed contracts:

Any written (including electronic) communications between the seller and any preneed agent, provider, trustee, investment advisor, insurance company, purchaser and/or beneficiary of the preneed contract and any other person related to preneed contracts and the funding of those preneed contracts;

Communications will often flag potential problems to an auditor, and accordingly this provision represents a crucial record.   The potential problem with this provision will regard how the State Board expects communications to be organized and stored.   Some communications might need to be stored based on their source.  However, communications that are specific to a particular contract, should be stored with that consumer file.   Funeral directors are bound to ask if this provision is going to require a redundant set of records.

Missouri Preneed Seller Records: Existing Insurance Policies

Posted in Compliance, Exams/audits, Recordkeeping

We anticipate that the following section of the Missouri record keeping proposal is directed at the situation where consumers assign an existing insurance policy to the funeral home:

All information obtained or possessed by the seller related to any insurance policy used to fund any preneed contract that may include, but not be limited to, a copy of the insurance policy, any assignment or beneficiary designations, and the status of any insurance policy.

Nothing in this regulation shall require the seller to affirmatively obtain records from the insurance company, but if the purchaser, beneficiary, insurance company, or any other person provides the seller with this information, the seller shall be required to maintain those records;

This section conflicts with earlier provisions that require the preneed seller to retain periodic statements provided by insurance companies.   To reconcile the two provisions, this provision should be restricted to policies where the funeral home has no contractual relationship with the insurance company.  Funeral homes often find Met Life difficult when seeking policy information.  Appreciating that reality, the proposal would seem to require the funeral home to retain whatever it receives about the policy, but no requirement exists to seek out a report or record

Missouri Seller Preneed Records: Cancellations

Posted in Compliance, Exams/audits, Recordkeeping

With regard to preneed contracts that are canceled, Missouri preneed sellers are being requested to retain the following documents:

 (1)       All records providing any sort of notice to the seller of the cancellation of a preneed contract; and

(2)        All records showing the date, name of who is paid, the amount paid out and a description of the type of payment made to any purchaser or any other person upon cancellation of any preneed contract, and the name and address to whom the payments were made.

The proposal language does not seem to contemplate R.S.Mo. Section 436.457 (when the seller may cancel a preneed contract).

Missouri Preneed Records: Keep Your Bank Records and Insurance Records

Posted in Compliance, Exams/audits, Recordkeeping

The next section of the Missouri preneed seller records rule would require funeral homes to retain copies of the periodic statements provided by banks, trustees and insurance companies:

Copies of account statements for joint accounts, trust statements for trust accounts, and any statements received from insurance companies listing the insurance policies in effect and/or the status of any insurance policy that names the seller or the provider, on a preneed contract sold by the seller, as beneficiary or owner.

If these records are maintained in electronic format by the financial institution or insurance company, then the seller shall have the means to access those records and be able to provide the board with appropriate access to those records within the lawful bounds and authorities of the board;

There shouldn’t be any argument that funeral homes should review and retain the periodic statements made available by their preneed funding agents.  However, the second sentence of the provision may represent an attempt to exercise power beyond the State Board’s authority.  We have underlined the suspect language.   Our criticism of this provision is the same that we discussed in the post regarding “Access to Trustee Deposit Records”.

To the extent that banks and trust companies provide on line access to trust clients, transaction records are typically archived after a couple of years.  After transactions have been archived, the preneed seller can no longer access the records via the internet portal.   Consequently, the staff’s proposals would require preneed sellers to down load transaction records on a regular basis.

Banks and trust companies use a variety of different trust accounting platforms, and some of those platforms offer limited options for reporting transactions.  To minimize account inputting, trustees may aggregate consumer payments prior to inputting deposits to their accounting system.   Consequently, the trustee may not have a record that shows the date and amount of each consumer deposit.   The best record the bank

So, the question is whether the State Board can dictate to sellers the content of, and access to, reports that banks and trust companies provide in an electronic format.

Missouri Preneed Seller Records: Insurance Payments

Posted in Compliance, Exams/audits, Recordkeeping

The next section of Missouri’s preneed record rule is confusing.  A prior provision of the rule (¶D(1)) would require a seller to maintain records reflecting the receipt of funds from an insurance company, and documents showing the seller’s performance of the contract.  However, for insurance funded contracts, the rule would also seek the following additional records:

 (a) Records showing notice received from the insurance company or the provider that the preneed contract has been fulfilled; and

(b) Records of any payment from the insurance company that the insurance company provides to the seller or that the seller obtains from the provider or any other source.

The first section may be seeking a form of notice that includes a confirmation to the insurance company that the preneed contract has been performed.  One insurance representative has suggested to the State Board that insurance companies are not in the practice of obtaining confirmation of the performance of preneed contracts.  Whatever the objective of that section, the language is inadequate to put funeral homes on notice.

Regarding the second section, how is the contemplated record different from that described in the prior paragraph D(1)?

Missouri Preneed Seller Records: Excess Funds

Posted in Compliance, Exams/audits, Recordkeeping

Missouri’s proposed preneed records rule includes a provision that would require funeral homes to document the payment of excess funds:

  1. For all fulfilled preneed contracts:

 (3)   Records showing payments made to the state of Missouri or to any other person including the amounts paid, the dates paid and the name of the person paid; and

The State of Missouri has long asserted that funeral homes have an affirmative duty to determine when the preneed contract beneficiary was the recipient of public assistance, and whether the State has a claim on excess preneed funds.  Preneed contracts with price protection guarantees from the funeral home will not result in excess funds that are subject to state claims.  However, the marketing of final expense products is becoming much more prevalent, and such products frequently pay all proceeds to the funeral home.  If the proceeds exceed the funeral and burial costs, the state wants a record of the excess proceeds and who was paid.  Funeral directors may not want the duties that come with such products, but the state views the funeral home as having benefited from the spend down that gave rise to the preneed contract, and the exclusion of the life insurance policy or final expense trust from resource testing.