Death Care Law Blog : Kansas Death Care and Preneed Lawyer & Attorney : Stalter Legal Services Law Firm : Funeral Law, Elder Law : Kansas City

For a brief period, the Illinois Comptroller posted a notice that sidestepped the inquiries made by funeral directors about the application of their Merrill Lynch settlements. The OIC website has since be revised.

One of the inquiries to the OIC may have involved whether the settlement funds could be applied to the litigation costs for pending lawsuits against Merrill Lynch. But for the litigation brought against Merrill Lynch, the funeral homes would not have received the settlements paid by the Department of Insurance. However, the settlement funds fall far short of the actual damages suffered by the funeral homes and consumers, and the argument may be that a portion of the funds could be used to continue the litigation.

Specifically, the Comptroller’s answered as follows:

It is the position of the OIC that we do not have the authority to instruct industry members on the proper disbursement of the funds.

In the following paragraph, the Comptroller warns:

During the review of future annual reports and audits, we will examine the method in which the funds are handled to assure that industry members acted in a good faith manner and in the best interest of consumers when determining the disposition of the funds.

While the litigation argument has merit, the Comptroller probably had concerns about the other uses funeral homes may have for the settlement funds. The notice may seem evasive to the industry, but it did not necessarily foreclose the application of funds to litigation that may benefit the consumer. But, funeral homes should pay heed to the warning that they will be held accountable for how settlement funds for active contracts are applied.
 

• Email This
• Print
• Comments
• Trackbacks

If their preneed contract is trust funded, Illinois consumers should soon be receiving statements from the bank or trust company that administers their account. These statements are one of the new requirements imposed by SB1682. The contents of the statements are governed by Section 2.h of the Funeral or Burial Funds Act.

The Comptroller’s Office sought the consumer statement in part to require accountability for the fees and expenses being charged by the IFDA. The Comptroller has brought legal proceedings to force the Association to refund a portion of the fees charged to the master trust. The California Master Trust faces similar complaints from the Cemetery and Funeral Bureau.

One allegation common to both master trusts was the fact the fees being charged were based on a ‘value’ other than the trust’s market value. The regulators have also challenged the reasonableness of the fees.

Another emerging reform issue that could impact this new Illinois disclosure requirement is whether the fiduciary (or its affiliates) receives a 12b-1 fee.

Consequently, Illinois preneed fiduciaries have cause for being cautious when reporting how much the preneed trust arrangement is costing the consumer (and the funeral home).
 

• Email This
• Print
• Comments
• Trackbacks

The Comptroller’s Office mailed out letters to funeral homes last week advising how to report the first contribution to the Pre-Need Funeral Consumer Protection Fund. The letter tracks the first few paragraphs of the “Senate Bill 1682 Information” page from the Comptroller’s website.

The funeral home letter includes two documents: a Fee Payment Record and a Bank Confirmation Form. For each contract sold, the funeral home must deposit $5 to the Consumer Protection Fund. The $5 may be funded out of the consumer’s payments. The Fee Payment Record will be used to record each pre-need contract for which the funeral home has made a deposit.

The Bank Confirmation Form is intended to establish an audit trail for the mass exodus of preneed funds from self trusted accounts, and from the IFDA master trust. This form serves to put funeral home’s pre-need trustee on notice that it will be required to provide records to the Comptroller’s Office.  

The Comptroller’s letter to funeral homes omits information that the website page provides consumers. Fiduciaries that are accepting Illinois pre-need trusts should take note of the Comptroller’s consumer information:

Notice to Consumers --- Your independent trustee must provide an annual notice to all consumers of the status of their funds including an explanation of any fees charged by the trustee, an explanation of the purchaser’s right to a refund and identification of the primary regulator of the trust or insurance company under state or federal law. Here are some suggestions for ensuring compliance with the new provisions:

· Be sure the corporate fiduciary or insurance company that you use is aware of this requirement.
· Be sure the corporate fiduciary or insurance company provides you with a copy of the annual notice.
· Retain a copy of this annual notice in your file.

Historically, preneed fiduciaries have defined their duties by treating the death care operator as the trust beneficiary, and the trust as a single account. The Comptroller’s trustee requirements reflect a trend that forces the fiduciary to factor the consumer into the beneficiary equation, and to provide an accounting on an individual contract basis.

• Email This
• Print
• Comments
• Trackbacks

With some industry members having already declared the preneed transaction dead, a recent AARP bulletin reports that the patient is not only alive, but it is regaining its strength. But, the reason for increasing preneed sales will only bedevil many death care operators: the rising costs of funerals.

Operators who face preneed competition will have difficulty swearing off the guaranteed contract if consumer advocates such as the AARP begin to recommend the transaction as a way for seniors to control future costs.

While the AARP’s stance on preneed may be moderating, the bulletin offers advice that consumers should heed:

• Visit at least three funeral homes and ask lots of questions.
• Ask for a detailed price list of products and services.
• Examine the insurance policy or trust documents that fund the preneed contract (even have a lawyer review them).
• Make family members aware of the funeral plans, and keep all documents and receipts in an accessible place.

• Email This
• Print
• Comments
• Trackbacks

Funeral homes and cemeteries are businesses that serve families when they are most vulnerable. To guard against exploitation, the death care industry establishes standards of professionalism, and state governments pass laws and regulations. Consumer advocacy plays an important role in educating consumers about these standards, and providing families tools in evaluating death care operators. To best serve their members, consumer advocates must be informed and objective in responding to potential abuses. If not, these organizations can discredit their purpose and damage their relationships with the death care industry. 

A Fort Myers newspaper ran a recent story about the frustrations of an elderly couple that wanted to trade in their burial crypts for cremation services. The story indicates the couple had purchased two burial crypts more than a decade ago, and became angry when the cemetery would not provide a credit equal to their original purchase price. The story relies upon Bill Swain, President of the Florida Funeral and Cemetery Consumer Advocacy, to flesh out the facts and to provide a perspective. In doing so, Mr. Swain seems to have spun the facts in an attempt to kill two birds with one stone: labeling the cemetery as greedy and disparaging preneed.

In response to the cemetery refusing to re-purchase the burial crypts from the couple, the paper attributes the following to Mr. Swain:

This is one of the drawbacks of prepaying for any funeral needs, ….

Why not just give them the money back when (the cemetery) can sell it for three times as much?

The laws in Florida are on the side of the funeral business, not on the consumers.

It is no secret that consumer advocates oppose preneed, and a casual read of the story would suggest that this is another example of preneed abuse. The couple also has the perception that the cemetery has been earning interest on the funds paid for the burial crypts. However, the story is misleading, and one can question whether Mr. Swain is responsible.

It is not clear from the facts whether the couple even purchased their burial spaces through a preneed contract. If the couple went to the cemetery, paid the purchase price and then received a deed to the spaces, that does not constitute a preneed transaction. If the spaces were purchased through a preneed transaction, the news report indicates the couple own the spaces, and therefore, one can conclude they received the property they contracted to purchase.  Consequently, Mr. Swain’s statements are misleading, particularly when you attempt to reconcile the 3rd statement from above with the FFCCA website:

Friends and Neighbors: The Governor signed SB 528, "The Sen. Howard Futch Memorial Act," into law!! We win!!! Whee!! Thank you, ALL of you, both industry and consumerr reps, for the support you gave our good cause. NOW...(you knew this was coming, didn't you?), we have to stay on top of the process by which the new regulatory structure will be put in place. Please stay alert. The effective date to implement "our" legislation is October 2005. There are lots and lots of critical dates between now and then, and we (FFCCA) will keep you informed. Let's all take a few deep breaths and yell: "Yeeeee-haw!! Bill Swain

Putting the preneed issue aside, another question is whether Mr. Swain is suggesting that cemeteries should refund a burial space purchase price whenever the owner changes his mind. If so, then it’s fair for the Florida death care industry to question whether Mr. Swain has made the necessary effort to become informed, and whether he can be objective in responding to consumers and reporters.

• Email This
• Print
• Comments
• Trackbacks