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

In a move to remain autonomous from the funeral industry and its oversight, the Missouri cemetery industry met with its regulator during the summer of 2008 to discuss reform legislation. Disagreements precluded effective legislation from being passed in 2009, but extensive changes was passed in 2010, and became effective on August 28, 2010. Now, the Missouri cemetery regulator has the task of implementing the law, and notifying cemetery operators and trustees of the new requirements.

Missouri’s Cemetery Endowed Care Trust Law (Sections 214.270 et seq) is administered by the Office of Endowed Care Cemeteries. A brief summary of the new law’s requirements can be found on the OECC’s website.

The new law makes substantial changes to perpetual care trusts (Section 214.330), sales documents (Section 214.282) and the preneed merchandise sales (Section 214.387).
Some perpetual care trusts define capital gains as income.

The new law incorporates the uniform principal and income act, precluding capital gains from being treated as income. This change is being imposed retroactively to existing trusts, thus forcing many cemeteries to amend their trust agreements. But, the new law does authorize fixed distributions that can exceed the trust’s income.

The new law also imposes the following requirements on perpetual care trusts:

A. Trust records must be made accessible to OECC examiners.
B. Trust instruments must be filed for approval.
C. Sales documents for interment rights and merchandise must comply with the Law, or the contract can be voided with interest refundable to the consumer.
D. The OECC can order the trustee to suspend your PC distributions.
E. PC deposits must be made on a monthly basis (instead of semi-annually).
F. The PC requirements have been raised for certain interment rights.

With regard to preneed, cemeteries must start from scratch. The prior law provided a low trusting requirement for services (opening and closings), and a segregated account requirement for marker and monument sales. To avoid the funeral licensing and trusting requirements of SB1, Missouri cemeteries must now comply with RSMo. Section 214.387. (To read a prior post on the new trusting requirement click here.)

Section 214.387 will require a cemetery to establish either an escrow account or a new trust, and comply with the following:

A. Escrow agents must be independent of the cemetery.
B. Escrow agreements and trust agreements must be filed with the OECC for approval.
C. Twenty percent of consumer payments may be retained but all subsequent payments must be deposited to a trust or an escrow account.
D. If a trust is used, all income must remain in the trust.
E. Deposits must be made within 60 days of receipt by the cemetery.
F. Preneed reporting to the OECC will begin in 2011.
G. New sales contract forms are required.

Banks that serve as a cemetery trustee will soon be receiving a letter advising of the new requirements. Missouri cemeteries will have more than New Year's resolutions to prepare for 2011.

 

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At the risk of plagiarizing the Missouri Funeral Directors and Embalmers Association, Missouri preneed funeral sellers, providers, fiduciaries and insurers face a new ballgame that will begin August 29th without a complete set of rules and guidelines. Funeral directors have a general idea where the game will be played, but they’re not quite sure what rules the umpires will use or how closely the game will be called.

In contrast, Missouri’s cemetery industry has been left to guess where their game will be played. Through last minute changes, the cemetery bill was pared back to those essential provisions required to authorize trust-funded preneed sales and a fixed-distribution provision for endowed care trusts. The resulting provisions do not begin to tell the underlying issues.

Funeral directors get the first crack at learning their new ‘rules’ on May 28th when the MFDEA sponsors a session with the Chapter 436 umpires. Based on the success of that session, one of the 436 umpires (the State Board) will probably explore regional meetings with funeral homes.

In the meantime, Missouri’s cemeteries will need to regroup in an effort to work out a consensus on preneed and endowed care legislation.

For a copy of the changes to Chapter 436 click here, and for Chapter 214 changes click here.

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Kentucky’s city administrators claim that with House Bill 369 they can now see the light at the end of the tunnel. For the past 20 years, municipal cemeteries in the Blue Grass State have been forced to operate under the same rules that apply to commercial cemeteries when it came to perpetual care funding. For that period, some municipalities built up some sizeable PC trusts. But as tax revenues declined over the past few years, those PC trusts became enticing to city administrators looking for ways to cover mounting cemetery expenses. These municipalities are telling the Kentucky legislature that not only should they be allowed to tap these funds for cemetery improvements, but that their cemeteries should be exempt from perpetual care requirements. The first objective makes sense, but the second does not.

Generally, state perpetual care laws restrict what the trust can invest in, and limit distributions to interest and dividends. These laws seek to impose conservative standards that will ensure the longevity of the fund. However, these restrictions also handcuff cemetery operators that must plan for the long term when facing capital improvements such as streets, lights and drainage. When the circumstances warrant improvements, cemetery operators and trustees should be afforded a mechanism to seek extraordinary distributions. HB 269 provides municipal cemeteries that mechanism. However the bill does not address the needs of other cemeteries, or to provide trustees the latitude to diversify trust investments so as to better fund projected improvement needs. 

HB 269 also takes a wrong turn when it comes to exempting municipalities from Kentucky’s perpetual care requirements. If municipalities do not require perpetual care fund contributions, the expense of cemetery maintenance will eventually be borne by taxpayers. Cemetery corporations understand perfectly the problems municipalities are having with revenues and expenses. Cemetery corporations have been forced to raise the price of burial spaces, expand the sale of merchandise and to become more proactive with preneed. It is no secret that the cost of a municipal grave space lags far beyond that charged by a corporate cemetery. Rather than avoid the discipline required by a properly funded endowed care fund, municipalities need to consider the revenue side of the equation. A recent American Cemetery article suggests that municipal cemeteries need to adopt the preneed business strategies of corporate cemeteries. I don’t think that advice is practical, but municipalities do need to explore options other than their taxpayer base. For those of us who choose cremation, or who purchase a burial space at a corporate cemetery, why should our taxes subsidize a municipal cemetery? 

About a year ago, a funeral director wrote to the Funeral Monitor to complain that corporate cemeteries are driving up the costs of burials. In support of his complaint, the funeral director made a price comparison between the burial spaces at corporate cemeteries and those at the municipal cemetery. As demonstrated by the Kentucky legislation and the comments of municipal administrators, these comparisons are not of apples to apples. Using distorted facts to blame a competitor for the rising cost of funerals and burial does a disservice to the entire death care industry.  

It has been almost 18 years since I drafted my first perpetual care bill. That initial effort took the tack of required disclosures about perpetual care funding, but allowed certain types of cemeteries to opt out of perpetual care.   Today, I think perpetual care funding should be required of all cemeteries.  

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