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

The new era of preneed exams and audits got off to a slow start in Missouri, but now there are indications the process is picking up speed.   The first notices of preneed financial examinations went out to sellers last January, and some are now going through on-site examinations.  A second wave of examination notices has gone out, and the State Board has begun preparations for the first examination reports.       

While the examination process will continue to evolve, the process will likely involve the following stages:

• The notice and request for documents
• A desk audit of the seller's documents
• An on-site examination
• An exit interview
• An examination report and the seller response
• (If violations are found) a request for a corrective plan proposal

In our next blog posts, we look at each of the stages in more depth.

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In August 2009, the members and staff of the Missouri State Board of Embalmers and Funeral Directors put in a lot of overtime to keep the preneed industry operating. Senate Bill 1 established brand new licensing requirements for preneed sellers. Without a license, a seller’s preneed contracts could be voided. However, the State Board lacked authority to issue a seller license until SB1 went into effect. With regard to August 28, 2009, the State Board faced the task of licensing hundreds of funeral homes, and responded by providing the industry an abbreviated process for obtaining the initial preneed seller’s license.

With the renewal of a seller’s license, the Missouri funeral home faces a much longer and detailed form (and process). The seller renewal form advises that the applicant may file their annual report upon receipt of the form. Realistically, the seller is precluded from filing the renewal and report until after September 1st. The annual report must include all contracts sold through August 31, 2010 (and beginning with August 28, 2009).

Depending upon how quickly its contracts are processed, the seller will have less than 60 days to work with trustees, banks and insurers to pull together the data and documents required by the renewal form. The failure to timely file the renewal form and report will cost the seller $200 and the authority to sell preneed until the license is renewed. Consequently, Missouri sellers would be best advised to begin working with their funding entities as soon as possible.
 

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 While the completion of the document may have felt like a birthing process to the staff of Missouri's Division of Professional Registration, the Chapter 436 Working Group Recommendations more accurately reflects an industry position paper that has yet to be completed.   Faced with a deadline imposed by the Missouri legislature, the Division 'finalized' the Recommendations in an 11th hour meeting of the State Board of Embalmers and Funeral Directors.  The State Board meeting underscored that many industry members have yet to grasp how the preneed transaction is structured and administered by competitors.  This is best demonstrated by the State Board vote to revise the Recommendations to include the following:

·         The board recommended a 100% trusting requirement with no administrative or trustee expenses by a vote of 4-2.

 During various meetings, the issues of preneed sales expenses and trustee administration expenses having been erroneously interchanged by Committee members.  This confusion is due in part from Chapter 436 allowing all income to be distributed currently.  If the trust does not accrue income, the law requires the seller to assume responsibility for trust expenses.  Trustees normally look to trust income for administrative expenses.  If the trust has no income, the trustee is dependent upon the seller for reimbursement.  This aspect  compromises the fiduciary's duty to the trust. By its action, the State Board would perpetuate a major flaw in Chapter 436 (if trust funding is to survive at all). 

The State Board's objective is to protect the consumer, and to do so it must think comprehensively about the three forms of funding: insurance, joint accounts and trusts.   Is the consumer better served if trust funding is effectively precluded?   Of course not. 

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