We are continuing with our posts to correct the misstatements made by the MFDEA in its May 24th video on Missouri law and preneed portability.  At minute 28:50 of the video, the association’s general counsel states that with regard to the transfer of preneed contracts, a successor seller must execute a State Board affidavit and assume all obligations of the preneed contract.   The video states that when funding has not kept up with price guarantees the successor seller may not be willing to assume all of the obligations of the contract (honoring the price guarantees).    The video suggests that the simple option is to cancel the contract and get a refund.

The problem with this explanation is that it ignores that Section 436.500.2(2) allows an assuming seller to file a plan in lieu of the State Board’s affidavit.  We have represented numerous Missouri successor sellers and used a “plan” called an assignment and assumption agreement.  Depending upon the available funding to be transferred with the preneed contract, the seller may or may not honor the original price guarantees.  In situations where the original seller has impaired or depleted the contract funding through misconduct, the successor seller may offer to enter into new arrangements with the preneed consumer.   The State Board may always reject a Section 436.500.2.(2) plan, but this office has never had that happen.

If a successor seller were to accept the video’s recommendation for cancellation, the original seller stands to reap a windfall.  For pre-SB1 contract where 100% of the consumer payments were trusted, the seller could keep that 20% and all trust growth.  For post SB1 contracts, the seller could keep the 5% origination fee and all trust growth.

This section of the video seems intended to discourage funeral homes from even inquiring about an assumption of their preneed contracts being administered by MFT.

A few weeks ago the Missouri Embalmers and Funeral Directors Association posted a YouTube video explaining their take on preneed portability under Missouri law.  The MFDEA frequently posts videos in response to industry queries, and for the association to spend 37 minutes on portability suggests that it is fielding numerous requests from MFT providers.  The video is full of double talk and misinformation that we will address in future posts.   However the video contains a glaring legal misstatement that must be corrected.

At minute 24.48 of the video, the MFDEA general counsel suggests that Chapter 436 allows a preneed seller to get a percentage of preneed trust income for their expenses, and when the seller has been taking that expense from the trust, those funds won’t be available for transfer to an alternate provider.   Excuse me, but Chapter 436 does not allow a preneed seller to recover expenses from preneed trust income.   Missouri preneed sellers may only look to the origination fee (5% of the contract purchase price) and the sales expense (10% of the sales price of guaranteed items) to offset the expense of a preneed contract.   Sellers cannot look to preneed trust income until the contract is serviced or canceled.  If preneed sellers were allowed to tap their trust income for company operating expenses, consumer trust accounts would see little if any growth.   We can’t help but wonder if this was an issue the State Board’s financial examiner had identified with the Missouri Funeral Trust, and which led to the MFDEA supporting the Division of Professional Registration when it sacked the Board and its staff last October.

When we pointed out prior misstatements in their YouTube videos, the association removed the video.  To retain the smoking gun, we have downloaded the MFDEA’s Portability video.   Here is the video in its entirety, but you may want to fast forward to minute 24:48 to hear the statement regarding seller expenses and trust income.  If the video disappears, contact us if you want a copy.

COVID is forcing American families to confront end-of-life planning.  There are numerous articles on the subject, but NPR published one during the summer of 2020 that made a recommendation that is often overlooked: creating an inventory.  My wife, the list maker, established our first inventory 30 years ago when our first child was born.  Over the years, that inventory was converted to an Excel spreadsheet so that it could be easily updated and shared.  The need for a comprehensive inventory was driven home with us when my mother-in-law’s health began declining last year.

Genelle, my mother-in-law, is also a list maker.  Unlike her daughter, Genelle has a disdain for computers, and prefers paper lists that are safeguarded in one of two safes.  During a visit to discuss her estate plans, Genelle opened both safes to retrieve her various lists.  My spouse has four siblings, and Genelle had broken matters down by the sibling who she thought was most familiar with that matter.  When we went to discuss a matter with the assigned sibling, the most common response was ignorance.  Genelle’s children were in the dark about the matters that constituted her estate.   The various lists were difficult to read and, after further investigation, incomplete.  Working as a group, my wife and her siblings began to work with their mother to put together the pieces of Genelle’s estate puzzle and create a comprehensive inventory.

My wife’s family is fortunate in that Genelle can still answer questions and provide information.   She can also execute documents necessary to clarify title in her estate assets or to sell property that has become difficult to manage.  As the NPR article suggests, it’s never too early to start work on an inventory.  Be comprehensive in creating the inventory, providing hyperlinks to accounts.  (User names and passwords should be kept on a separate document, to be provided to your financial power of attorney and estate executor.)

A former Kentucky funeral director has been charged with multiple felony preneed thefts, some of which occurred 25 years ago.   Various news sources report that Donald Creech began pocketing consumer preneed payments as early as 1996. The consumer preneed payments were to have been forwarded to the Kentucky Funeral Directors Association’s master trust.   Until he was forced out of the business in 2016, Mr. Creech is believed to have kept approximately $250,000 of consumer funds.

Preneed fraud is difficult to detect when a funeral director files the contract in a ‘special drawer’.  So long as the funeral director continues to own and operate the business, he will service the contract when there’s a death and no one is the wiser.  But if there is a change of ownership or control of the funeral home, the unfunded contract will come to the surface upon the contract beneficiary’s death.   That can be many years after the contract was sold, or as in Mr. Creech’s case, years after he was forced out of the business.

The statute of limitations for preneed theft does not begin to run until the fraud is discovered.  Although the theft may not be discovered until the family requests the prearranged funeral, prosecutors need not wait until there is a death to prosecute.  A key element for preneed fraud prosecution is the state law requiring the consumer funds be deposited to trust or remitted to an insurance company.  Local prosecutors may perceive that a fraud is dependent upon the consumer being denied their prearranged funeral.  However, the fraud is complete when the preneed seller fails to deposit or remit the funds pursuant to the state preneed law.

CNN underscored recently posted a good article about final expense life insurance.  Death care clients have been contacting us more frequently about this type of policy, and we will share some of their issues.

Funeral homes are backing away from the conventional life insurance policy for some of the same reasons.  Large life insurance companies are often slow to pay policy proceeds, leaving the funeral home waiting for months.   Some insurers would prefer to deal with individuals rather than funeral directors, and require additional documentation.   These additional requirements are frequently made known weeks after the funeral, forcing the funeral director to chase down family members for the requirements.  These issues have led to some funeral directors rejecting insurance policies or charging administrative fees for insurance assignments.

If the consumer intends to purchase a final expense policy for funeral and burial expenses, the following questions should be asked when shopping for a policy:

  1. What are your requirements for proceeds assignments to a funeral home or cemetery?
  2. What is the average waiting period for payment of the policy proceeds?

If you have picked out a funeral home and/or cemetery for your funeral and burial, share the insurer’s responses with them to ensure your family will be able to use the policy without one of the problems discussed above.

Dear Senator Schatz,

We appreciate that your Senate Appointment Committee has a packed hearing date for April 20th.  So, the Missouri funeral industry not represented by the Missouri Funeral Directors and Embalmers Association requests a single question be asked of Ms. Solon:

If confirmed as executive director of the Division of Professional Registration, will you honor the autonomy that we the Legislature gave the State Board of Embalmers and Funeral Directors with RSMo Section 324.001.11?

If clarification is needed why the question, please feel free to share my January 6th letter.  If the appointee and the industry can come to an understanding about the authorities that the Legislature gave the State Board, then signal to the Governor that it’s time to make independent and qualified appointments to the Board.

With legislation introduced this past January, Illinois could join those states which expressly authorize cemetery fiduciaries to take the unitrust election and make fixed distributions to cemeteries.  Senate Bill No. 3207 proposes to amend Illinois’ Cemetery Care Act to add provisions which would define ‘total return distribution’ and thereby allow care fund trusts to make distributions between 3% and 5% of the trust value.  To guard against a trust’s depletion, SB3207 would require the care fund trustee to adopt a written investment policy aimed at achieving growth and income.  The bill also includes investment performance floors that could require the fixed distribution percentage to be decreased (or have the trust convert back to a net income distribution) if trust’s investment performance results in a 10% value decline.

Sensing that bill as introduced did not go far enough, an amendment has been proposed to expressly authorize small care fund trusts to be commingled within a master trust.  Pursuant to a new Section 3.1, a care fund trustee would apply to the Illinois Comptroller’s Office to establish a master trust.  As discussed in prior posts, the master trust concept is crucial to achieving investment diversification for small trust funds (a need for economies of scale).  Without adequate diversification, small trust funds could not achieve the investment returns needed to avoid depletion of the trust.  And as discussed in the previously linked post, few states have active cemetery associations.  But Illinois is the exception to that rule.  Since SB3207, as amended, touches all the bases, we would have to conclude the ICFHA is pushing to get this bill passed.

With Governor Parson withdrawing all four of his Missouri Funeral Board appointments, the industry is asking what will happen next.  The Governor’s office had been watching the festering dispute between the Division and the State Board, but was unsure whether the industry cared.  While the MFDEA’s support for the Division acting director was undeniable, the Governor was being warned that the association did not have the industry’s support.  The industry responded not through the association but through individual funeral directors expressing opposition to their respective Senators.   Objections from funeral directors forced Senators and the Governor to look beyond MFDEA support for Ms. Solon and her actions, and instead at the underlying law and facts.

Ms. Solon’s confirmation hearing is scheduled this coming week, and we expect that she will receive the benefit of the doubt by the Senate and will be confirmed.  By the benefit of the doubt, we mean that Ms. Solon is a newcomer to the funeral industry and would not have implemented her cost savings plan, the restructuring of the Board and the termination of the Board staff without advice of multiple individuals perceived as having deep knowledge of the industry.  An appointee that followed the advice of a single individual without cross checking that advice would be faulted for poor judgment, and appropriately denied confirmation.  Ms. Solon received seriously flawed advice from more than one industry ‘expert’.

Ms. Solon will be given an opportunity to re-chart her course with the State Board.  To provide assurance to the industry that the next State Board is autonomous, the Governor will not simply delegate the appointee process to the Division.  We anticipate that some deference will be given to the Senate regarding the selection process.  But appointees should expect inquiries whether they can look past the events of 2021 and strive to create an effective working relationship with the Division director.  Appointees will also need to be impartial when investigating what licensee(s) sought to derail the preneed examination process.

When an Association Press story broke a few months ago, the MFDEA response was to suggest that the reporter had been influenced by individuals who were anti-Governor Parson and anti-Division.  But the reality is that funeral directors opposed to Ms. Solon’s actions are supporters of Governor Parson.  Multiple parties reached out to the Governor to request he get involved.  The Governor was warned that the industry was angry that the Division’s acting director violated state laws to replace the Board with licensees who would follow her directives.  Funeral directors believe State Board members should be owner/operators with years of experience running a funeral home.  Board members should draw on that experience when deciding the appropriate discipline when violations occur.  Board members should not be part-time employees or individuals that retired from the business decades ago.  RSMo Section 333.151 is not as difficult to read as the MFDEA suggests:

Each member, other than the public member, appointed shall possess either a license to practice embalming or a license to practice funeral directing in this state or both said licenses and shall have been actively engaged in the practice of embalming or funeral directing for a period of five years next before his or her appointment.

MFDEA members like one past president have written to the Governor to commend the Division acting director for having put an end to the State Board’s “photographic surveillance” of funeral homes.  This past president of MFDEA stated that instead of actually inspecting the funeral home, the Board inspectors were taking pictures which were then reviewed in Jefferson City for alleged violations.  The past president longed for the days when he served on the State Board when real inspectors were sent to funeral homes.  This past president of the MFDEA did not obviously read our blog post Missouri’s Gottcha Board: Digging Deeper.

If he had read the blog instead of relying solely upon the MFDEA for his information he would understand that the Division was blocking the State Board from hiring real inspectors.  He would know that the Division’s CIU inspectors did not know difference between a hole in the bottom of crematory retort and the thermostat on the nearby wall.  He would know that this funeral home had performed hundreds of funerals without a licensed funeral director.  He would know that the funeral home had sold hundreds of thousands of dollars of preneed without a license and without reporting them to the State Board.  But then he didn’t know these things because the MFDEA did not report these problems to their members.  Nor did the MFDEA want to explain why the Division dismissed the lawsuit against the funeral home before it had corrected its violations.  That would conflict with the endorsement already given to the Division’s acting director.  Had that endorsement been sealed with a promise from the Division?