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

The families of those buried at Grandview Memorial Gardens are angry.  First they are advised that the trusts meant to fund future burials and the care for those graves are not properly funded. Next, they learn that some of the cemetery’s gardens have a problem with grave spaces flooding with water. When Indiana regulators and prosecutors reported there was nothing they could do to correct the situation, plaintiff attorneys filed a class action suit naming several entities as defendants, including three banks and the consolidator that sold the cemetery in 2001. The Indiana legislature has also reacted to the situation with a bill intended to eliminate the ability of the death care industry to use a custodial arrangement for these funds, and to place a greater burden on fiduciaries to police fund distributions. 

Are Grandview’s problems the fault of the three banks named as defendants in the lawsuit?  Of course not.  Should the preneed fiduciary be required to police distributions to the extent required to determine if the vault delivered is a 'sealer' or not?  Of course not.  The Grandview situation may be more indicative of the problems facing the death care industry than the irregularities facing the Illinois Funeral Directors master trust.  There are several factors that have contributed to the Grandview situation. Consequently, there are no simple answers, and shifting the blame/responsibility to the financial institutions that serve the death care industry is short sighted and counterproductive. 

Indiana’s death care laws are a hodge-podge of sections spread among different chapters, with different effective dates. If funeral directors and cemeterians cannot accurately cite the legal requirements for their trust funds, should legislators pass the responsibilities over to the financial institutions? 

It doesn’t take much speculation to guess why Indiana’s regulators have not taken any actions. More than likely, the Grandview accounts complied with the Indiana laws (albeit they were likely set up as custodial accounts). This won’t stop the class action attorneys from pursuing the deeper pockets of the banks and Carriage. 

If the death care industry should decide to take steps to improve the image of preneed and perpetual care, death care fiduciaries have to be afforded the resources and procedures required to provide meaningful oversight to account distributions. Fiduciaries are completely dependent upon the death care company for the documentation required for substantiating distributions. Many fiduciaries rely upon certifications from the death care company that a contract has been performed pursuant to its terms. But such procedures cannot ensure that a family receives a ‘sealer’ vault, if that is what the preneed contract called for.  HB 1026 will not solve Indiana’s preneed woes. The problem is deeper than the water that filled Grandview’s vaults. 

The approach taken by Grandview’s class action attorneys reminds me of the search for the infamous Keyser Söze.  As if they were reading from the script for The Usual Suspects, the attorneys advise they think they have it figured out but that legal process will have to grind out justice slowly.  For the sake of the Grandview families, we hope there will be a different ending than what happened in the movie. In real life, there is no Keyser Söze to whom all blame can be attributed.  Instead there are only some bit players who followed the twisting trail of Indiana law, and the only characters likely to profit from this drama are the attorneys. 

To help the Grandview families, the first course of action needs to be the repair of the cemetery’s drainage system. If the cemetery’s perpetual care fund was depleted through improper distributions, determine who did so. There has been little press coverage about the prior owner’s response to the perpetual care issues. Did Madison Funeral Services understand the requirements of cemetery maintenance when it purchased Grandview from Carriage in 2001?   Did the more stringent perpetual care law govern Grandview’s fund?   How much of a perpetual care fund did Madison receive from Carriage? 

With regard to whether the Grandview families were defrauded with inferior vaults, what did the preneed contracts provide? If one reads between the lines, the Jefferson County Prosecutors are indicating there is no basis for a fraud prosecution. The statute of limitations excuse sound like, ah, an excuse.  Doesn’t the statute of limitations start from the point of the discovery of the fraud? If consumers were promised a ‘sealer’ vault, and an investigation does not prove the fraud for 8 years, has the statute of limitations just been triggered? The danger for the Grandview families is that the contracts don’t call for a ‘sealer’ vault. Someone may have planted the ‘sealer’ seed in their minds, and we should hope it wasn’t someone looking to profit from the families’ emotional distress.

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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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For the second time in 7 years, the Delaware legislature is taking up the issue of cemetery oversight. As with most death care legislation, Delaware’s Cemetery Study Committee faces two hurdles: finding answers for aging cemeteries that lack revenues for maintenance, and reconciling the conflicting goals of cemeterians, funeral homes, monument vendors, local governments and the public.  

Neglect is already a problem for cemeteries established before perpetual care was a requirement, and it will become an issue for cemeteries that are not proactive in enforcing existing PC requirements.  In a sense, there are two different problems and finding a way to provide care for the older, "public" cemetery will be the greatest challenge.  Frequently the answer to this situation is more taxes and county/municipality control over the cemetery.   

With regard to cemeteries that have 'inventory' to sell, enforcement of perpetual care requirements is the priority.  However, with the costs of funeral and burials on the rise, the death care industry will be reluctant to accept requirements that drive up the cost of a grave space. 

While many cemetery operators have embraced the need to properly fund and administer perpetual care trusts, laws need to better enforce PC funding requirements and afford fiduciaries more flexibility in how PC funds are invested. 

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