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

The Topeka Capital-Journal has identified the essence of the Secretary of State’s plan for Kansas cemetery regulation: addressing cemetery problems before the trusts go upside down.

There are two types of cemetery trusts: perpetual care trusts and preneed trusts. Perpetual care trusts (or permanent maintenance trusts) provide the cemetery crucial funding for mowing, and the other expenses related to care of graves, markers, roads and trees. Preneed trusts are required when cemeteries sell services and merchandise (such as vaults and markers) where delivery is deferred to a later date.

Both types of cemetery trusts have a funding liability that serves as its waterline. It is fairly common for a trust to ‘take on water’ when the value of its assets falls below the required deposit balance. As the trust takes on water, the operator’s liability will become so great that it will flip the boat, and take all aboard down.

A cemetery trust going ‘upside down’ can be an indicator the operator has used the consumers’ payments to pay bills instead of making the required deposits. These are challenging times for cemeteries, and some operators may find it easier to ‘borrow’ from the consumer than to go to the bank for a loan or to implement difficult business changes.

The Kansas Secretary of State has taken the position that it only has the tools to spot those cemetery operations that are listing dangerously to one side or the other. To avoid the expense of salvaging a shipwreck, the Secretary wants the ability to intervene earlier. To identify troubled vessels, the Secretary of State’s legislative agenda would have required monthly reporting from the cemetery operator and the trustee. However, the Secretary’s plan ran afoul of the industry’s supertanker: SCI.

At a legislative hearing, SCI took the position that the burden of monthly reporting “would greatly overshadow any benefit which could otherwise be obtained through the more practical option of annual reporting.” For the large, public companies subjected to regular reviews by the Securities Exchange Commission and the Internal Revenue Services, a state mandate requiring monthly reporting might be redundant and burdensome. However, the industry continues to be dominated by the independent operator, for whom the Secretary is the principal regulator.

In the next Kansas legislative session, certain compromises need to be struck for the benefit of the consumer. More frequent reporting should help flag irregularities that are symptomatic of the troubled operator. Independent fiduciary reporting is also needed as a cross check to what the operator is filing. And, if this is redundant to an operator’s existing reporting systems, the law could provide the flexibility to allow an operator to ‘clep out’ of monthly reporting.

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Mortuary Management’s July/August Colleague Wisdom column underscores how difficult it can be to run a trade association. I can empathize with the funeral home operators who took the time to provide their thoughts. As an attorney who specializes in the death care industry, I have to weigh the costs and benefits of membership in trade associations from two industries.

Every so often, the American Bar Association calls to solicit my renewal to the ABA. I was an ABA member back in 1986, the first year out of law school. After that first year membership, I never renewed again. Yet, they continue to call. And I will continue to decline, because the ABA is not a resource that is worth the cost (to me).   

In contrast, I do belong to the Missouri Bar Association.   The MBA provides services and programs that justify its membership costs to me. The MBA is not only a good source for forms and information, it provides some reasonable discounts for continuing education classes. However, I have not found that to be same for the Kansas Bar Association. The KBA seems to be marketing primarily to the trial attorney bar (a reflection of an economic reality).

If comments published in The Colleague Wisdom are representative of the funeral industry, the article reflects that funeral directors also tend to look more to their state association for the services and programs they need. It should come as no surprise but the level of satisfaction among funeral directors varies greatly. It is difficult to compare state associations because each has its own unique set of factors or hurdles. However, there seems to be certain common standards.

The Colleague Wisdom comments provide some insight to what industry members expect from an association, and why some do not participate. The comments also touch upon the revenues that subsidize the association. As Mr. Wigger so succinctly states: membership in a state association is a matter of weighing the costs vs. the benefits. One reality is that an association must impose costs in order to have the funds needed for programs and services that will attract membership. It is also a reality that some industry members will complain no matter what the cost. 

Some of the Colleague Wisdom comments have been highlighted in yellow, green and pink. The yellow comments seem to reflect an association’s perceived values. The green comments make note of a source of revenue, and the pink comments reflect criticisms. Associations need to be sensitive to criticism, and adapt to the membership’s needs. In order to do so, the association must seek input (even if it is done so by a coded survey). 

Now for the obligatory preneed comments:

Funeral directors who are opposed to preneed will need to appreciate that master trusts are an important source of revenue for association programs and organizational expenses. The master trust is an even more important revenue source for associations in states where continuing education is not required. But as one Colleague Wisdom commentator points out, association leadership must be careful with regard to the master trust becoming a competitor to its own members. In a sense, the master trust cannot help but be a competitor to larger independents that have their own preneed administration. The master trust may be the only way for the small operator to effectively compete for the preneed sale. Accordingly, it will become incumbent for association leadership to diffuse these situations through cooperation and attempts to find mutual benefits. 

Association leadership must also be careful that the master trust does not become a source of dissatisfaction when earnings and/or expense expectations are not met. Disclosures, accountability, frequent communications, innovation and leadership will be crucial to retaining membership satisfaction. 

With the NPS failure, associations may have an opportunity to expand their master trusts. But to do so, some state associations need to assess why funeral homes turned to NPS in the first place. Some funeral homes did succumb to the promises of profit, or looked forward to the Rep visit, but many did so out of dissatisfaction with their master trust. For some funeral directors (like those in Illinois), the state association may have a difficult task in regaining the membership’s faith.

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