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

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).
 

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This blog commented a few weeks ago on Dan Hynes’ failure to follow through on his own legislation. Since that post, the new Comptroller revised the Annual Report to eliminate references to self-trusted funds. However, funeral homes that transferred out of the IFDA master trust will still find the report difficult to complete.

The Comptroller’s Annual Report includes a schedule called the Annual Statement of Funeral or Burial Trust Funds, which requires the trust fund to be accounted for as though it were a depository account. The schedule seeks contributions, interest and withdrawals. The schedule doesn’t contemplate the losses suffered by the trust when Merrill Lynch liquidated the fund’s insurance investments.

For transferred accounts, the IFDA made those entries to the schedule required to ‘zero out’ the account. The ‘withdrawals’ reported by the IFDA will not reconcile to what the successor trustees received.

Ms. Topinka’s staff will find audit trail from Merrill Lynch to the new fiduciaries difficult to follow when relying upon the Annual Reports due March 15th.
 

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When funeral arrangements are made subsequent to the death of a family member, the meeting with a funeral director can be very emotional. Addressing the paperwork required by law often adds to the stress of the arrangement meeting. Sensitive to the individual needs of the family, funeral directors attempt to balance legal requirements with the emotional state of the individual who controls the deceased’s disposition.

The funeral director’s arrangement paperwork is defined principally by the Federal Trade Commission’s Funeral Rule. The Funeral Rule requires that the goods and services selected at the conclusion of the meeting be itemized with costs. The intent is then to allow the individual to evaluate the selections so that he/she can make any desired changes.

Funeral homes must also comply with the Funeral Rule when selling funeral arrangements on a preneed basis. For guaranteed contracts, this would mean that an itemization statement may be incorporated by the preneed contract. To cut down on the paperwork prepared at the time of death, a funeral director may be tempted to resort to the statement of goods and services used for the preneed contract. While this practice is not prohibited by the Funeral Rule, several factual circumstances would make the practice a violation of the Rule.

The FTC website includes “Recent Funeral Rule Opinions”. The opinions include explanations about various fact situations that impact how the statement of goods and services must be prepared. For example, if the preneed contract includes cash advance funds, the funeral director must consider whether the original statement’s descriptions are still accurate. If the family changes any of the original selections (for example, a different casket is chosen), a new statement must be prepared. If the original statement includes a generic description of a casket, it may not comply with the Funeral Rule.

Using the preneed statement may seem a convenience in saving time and minimizing the stress of the arrangement meeting, but the better business practice would be to prepare a new statement of goods and services. The new statement of goods and services also serves to document the funeral home’s compliance with the terms of the preneed contract. With preneed audits looming in various states, funeral directors may regret the time they attempted to save in the arrangement meeting.

Depending upon Congress, theBereaved Consumer’s Bill of Rights Act of 2009 may impose the same Funeral Rule on cemeteries.
 

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