Despite what some may say, the State Board shake up and the termination of its executive director came as a surprise.  But the most surprising move by the Division was the termination of Randall Jennings, the preneed examination supervisor.  The examination supervisor had no role whatsoever in the funeral home inspection process.  Baffled by that development, I went to a source that is in the know about how Jefferson City works.  Respecting the anonymity sought by this source, all I can offer is that a preneed seller had complained that the exam supervisor had referred to him with a derisive political adjective.

Over the course of the past 10 years, my clients have been through dozens of preneed financial examinations.  Those examinations had put me in contact with Mr. Jennings numerous times.  In some situations, this meant meeting with Mr. Jennings at the client’s office to discuss seller records and the procedures to be followed.  In each such meeting, Mr. Jennings behaved in a courteous and professional manner.  While a few clients complained about the onsite examination being an imposition on their time, none complained about Mr. Jennings’ demeanor.

Acknowledging that this source has an irrefutable reputation within the industry, I can’t help but think that the complaining preneed seller had other cause for going to the Governor or the Division.  Seeking to capitalize on the Governor’s displeasure over funeral home inspections, the seller planted another issue to address with a State Board housecleaning.  If the allegation had been handled appropriately, the Division would have referred it to the State Board when it had members familiar with Mr. Jennings and the preneed seller.  But instead, the Governor stacked the Board and the Division directed the terminations of the only two Board employees involved with the preneed reform efforts since the passage of Senate Bill No. 1.

For those who have forgotten, Senate Bill No. 1 was heralded by the Missouri Legislature as the reform that would protect Missouri preneed consumers (Senator Delbert Scott’s Press Release).  The Columbia Missourian reported how the new law authorized regular and random state audits of prepaid funeral sellers to ensure consumer funds remained in trust until funerals were paid for.

How does the State of Missouri propose to fulfill its promises of protection to the preneed consumers when the State Board is stripped of all employees with examination experience?  Will the Governor follow Harry’s lead and state the Buck stops at his desk?

The State of Missouri seems hell-bent on creating work for Jefferson City attorneys.  As we reported earlier this summer (You were Warned!), the Division of Professional Registration blundered in its first move to control how the State Board of Embalmers and Funeral Directors conducts inspections of funeral homes.  Since then, the Division has also declared the State Board (in 1999) ceded control of its personnel budget, and lacks the funding to hire its own inspectors.  (We will follow up on this claim later because it would seem the Division should have documentation to back up such an assertion.)  Even though the State Board suspended non-essential inspections until its authorities over personnel and funding could be sorted out, the Division delivered a fait de complis to unwanted funeral home inspections by stacking the State Board with 4 new members, and then sacking the Board’s executive director and preneed audit supervisor.  (Underline that latter position, and we’ll come back to it in a future post.)

You may be asking how this benefits Jeff City attorneys.  During a heated discussion at the State Board’s last meeting  challenges were made to two new Board members about their qualifications to serve.  Section 333.151 sets out the statutory requirements for serving on the State Board, and they include that the appointee be licensed as either a funeral director or an embalmer, and have been actively engaged as such for a period of five years preceding the appointment.  While all three new industry board members are licensed, two do not seem to meet the 5 year active engagement requirement.  One of the new board members advised he had perhaps embalmed a body during the past 5 years.  Another new board member acknowledged she was a full time pharmacist at a hospital.   The State should anticipate that licensees threatened with discipline will likely challenge the Board’s legitimacy and authority to the Administrative Hearing Commission.   This same authority and legitimacy issue will undoubtedly be raised by attorneys bringing wrongful terminations of the State Board staff.  And conceivably, this qualification issue casts a shadow on the legitimacy of every license issued by the State Board subsequent to Governor’s appointment of these two individuals.  No wonder some attorneys make a living off lawsuits against the government.

Rumors are also running rampant that the Division had been actively recruiting State Board candidates that would follow orders.  Concern for Division retribution would seal to silence those funeral directors who may have been approached.  But the rumor may have been unwittingly validated by the Division.  Last Thursday’s Board was started with the disclosure that  script provided to the newly appointed Board members had been leaked.  And per the script, the new Board members voted as the majority block to go into closed session to fire the staff.  We have not yet obtained the ‘script’ but will be making open record requests of the new board members, the State Board and the Division.    [We’ll come back in a future post about how if accurate this constitutes a gross violation of Missouri’s Sunshine Law.  But then again, it has only been a few short years back to when a prior Board chairman and Executive Director also violated the Sunshine Law in attempts to influence Board decisions.]

All of this started more than a year ago when MFDEA accused the State Board of gotcha tactics when conducting inspections.  In defense of the Board, they had stated a preference to hire and train its own inspectors, and thus avoid the picture taking.   It was suggested that disgruntled funeral homes were complaining to Governor Parsons, and he wanted an end to the picture taking.   With the practice having been tabled, why then stack the Board and terminate the staff?  Had all this come to be because the Board stepped on the toes of a Governor ally?   And if this had to do with gottcha inspections, why terminate the preneed audit supervisor?   The next phase of preneed audits was to have included an expanded role for the Board inspectors.  Sacking the staff will likely set the preneed audit process back a few years.  (We’ll dive into this aspect in a future post.)


On August 30, 2021, the legal saga of National Prearranged Services came to a rather anticlimactic conclusion.  In a relatively short decision, the Eighth Circuit Court of Appeals affirmed Judge Richard Webber’s July 2019 judgment that awarded $102,135,393.07 damages against PNC Bank, a successor to the NPS preneed trusts.  The final damages award is a far cry from the original judgment of $490 million awarded by a jury in May 2015.  The hopes of funeral directors were quickly dashed when PNC Bank successfully appealed the 2015 judgment and was granted a new trial.  Confined to breach of trust claims against PNC Bank (and not tort claims), the trial court found Allegiant Bank guilty of several fiduciary breaches.  Without the tort claims, the trial court was limited as to what damages could be awarded, and the award was reduced by $390 million.    Funeral homes hoping to share in the original damages award will be disappointed.

For preneed fiduciaries, the Eighth Circuit’s decision affirmed all of the trial court’s findings regarding Allegiant’s breaches of trustee duties.  The trial court’s findings of facts covered 305 pages, and we summarized some of those fiduciary breaches in three posts made in August 2019.  Paramount among those duties was the due diligence required for “know your client”.   The trial court also faulted Allegiant for its failure to maintain or supervise consumer level deposit records.  The appeals decision affirms that the days of treating the preneed trust as custodian in nature are long gone

Since the onset of Covid, the death care industry has experienced an uptick in preneed sales.  As witnessed recently on the Bankrate website, the financial planning industry has taken notice.  Bankrate is a website that provides comparisons of various financial products, and recently posted an article titled “The pros and cons of funeral trusts”.  The article opens with a reference to the IRS code section defining a qualified funeral trust and discusses the advantages of a trust for final expenses.  Noting the risks of the conventional preneed contract, the article recommends a do it yourself approach to setting up a funeral trust.  We have long been a proponent of the financial industry offering a trust based product for final expense purposes.  This would be a preneed alternative that many small death care operators would welcome.   What mom and pop funeral home wouldn’t like to avoid the hassle of filing annual reports and monitoring state law compliance?  A final expense trust product could also be attractive to churches and hospices.  But the Bankrate article fails to grasp certain complexities of the preneed transaction that doom the DIY funeral trust.

Costs are the first hurdle to establishing a DIY funeral trust.  As the Bankrate article suggests, we agree that an independent trustee is needed.  Back in 2013 we explored the costs of individual funeral trusts.  We found a few boutique trust companies that offered up such types of trusts, but all charged minimum set up fees and/or minimum annual fees.   While most financial planners have trust templates for standard estate planning purposes, the funeral trust is a different animal.  As the Bankrate article hints at, an individual may have to seek the assistance of an attorney.  That means the trust instrument may cost several hundred dollars.  Between the trustee and a drafting attorney, the DIY funeral trust could cost more than $500 to set up.

The Bankrate article glosses over the challenge of investing a small trust account.  We addressed this same issue when posting in response to a 2018 New York Times article about funeral planning.  Like so many funeral home preneed trusts, fees will eat up small investment funds.  To be economically viable, financial institutions must embrace the funeral trust concept and offer it as one of their products.  As with the funeral master trusts we have written numerous times, the independent funeral trust will need economies of scale and diversification.

While the Bankrate article gave lip service to IRC Section 685, the DIY funeral trust can never satisfy the qualified funeral trust requirements.  Section 685 provides the death care fiduciary substantial tax reporting advantages that are key to administrative efficiencies.  The following hyperlink displays some of our posts on Section 685.  The DIY funeral trust is in essence a grantor trust under the tax code.

The Bankrate article includes comments from a financial advisor who acknowledges her industry is not geared to providing final expense products.  She suggests that accordingly, financial planners tend to build funeral expenses in as part of the overall estate plan (rather than set up a specific trust).  We saw similar advice in article a few years ago and posted about frequent estate planning mistakes and the need for a final expense trust (When a Will will be too late.)

The DIY funeral trust may seem a safer alternative to the cons of the conventional preneed trust: the lack of portability, poor refund rights, and vulnerability to fraud.  An independent funeral trust program could provide individuals the means to preplan and prepay their funeral and burials without being obligated or committed to a particular funeral home or cemetery.  But such a program would have to provide consumers the documents, fiduciary and legal services and expertise to carry out their funeral and burial decisions. This is too much to ask of a DIY funeral trust.

Search the internet for “cemetery” and “friends of” and you will find a number of independent maintenance associations.  We’re not referring to Facebook groups that organize volunteer events for an abandoned cemetery, but rather we want to highlight those formal organizations established to provide continuing financial assistance to an active cemetery.

As a cemetery nears its capacity, revenues from lot sales and interment services will decline.  Most cemeteries are already experiencing revenue declines because of the public’s embrace of cremation.  Declining revenues require cuts to the cemetery’s maintenance budget.  This situation has led some of our cemetery clients to convert to tax exempt status so they may seek donations from prominent individuals with family buried in the cemetery.   However, caring families are frequently taking an independent route by forming their own maintenance association.

Established by descendants of cemetery lot owners, an independent maintenance association may have an agenda that differs from that of the cemetery board.  While the cemetery board may be focused on keeping the grass cut and the roads in repair, the independent maintenance association may want the chapel renovated, the mausoleum roof repaired or historic markers replaced.  Not wanting their donations diverted to general cemetery needs, the independent maintenance association retains control over its own budget or trust.  The association can also steer clear of trust distribution constraints that may be imposed by state law on the cemetery endowed care trust.

To achieve its own tax exempt status (so that donations are deductible), the independent maintenance association must qualify with the IRS as either a Section 501(c)(3) charity or a Section 501(c)(13) cemetery company.  Implicit in this approval is that association also be formed under state law as a company or association.   Costs will be incurred with both the formation of the company and the IRS filing.

The following hyperlink will take you to the Perservation and Enhancement Fund page of Mount Olivet Cemetery in Frederick, Maryland.  This page provides history of their ‘friends/preservation’ association and the challenges of preserving their garden cemetery.  The page provides a valuable marketing tool in seeking donations.

The independent maintenance association is not a friend that is available to the for-profit cemetery.  The tax exempt status precludes the association from providing maintenance assistance that is otherwise required from a for profit company.  For cemeteries with a mausoleum in need of repairs, we have seen the mausoleum being transferred to a new 501(c)(13) company.  Future crypt sales provide revenue for mausoleum repairs, and the independent maintenance association is then formed to help subsidize repairs and future upkeep.

A festering dispute between Missouri’s State Funeral Board and funeral directors association came to a head in a public conference call today.    The State Board scheduled the meeting in response to  its parent agency (the Division of Professional Registration) blocking the Board’s hiring of an investigator.  The Board held the meeting to discuss what actions should be taken to clarify its authority to hire and retain inspectors and investigators.  When the Board discussed the possibility of requesting an Attorney General opinion, the MFDEA raised the spectre of a 2015 Supreme Court decision and warned the Board to be careful about ‘what it asks for’.   The association went on to declare that it  had warned the Board against having inspectors taking pictures during funeral home inspections.

This dispute began in the fall of 2020 when Division of Professional Registration sought to require the State Board to use investigators from its central investigation unit.  The State Board acquiesced to that request but instructed those investigators to take pictures of inspection sites so that the Board and staff could instruct the investigators what to look for.  That practice led the association to make accusations of a ‘gottcha practice’ where funeral homes would be cited for infractions based on the photographs.   The Board and association went back and forth on whether funeral homes were actually complaining about the practice.  It was our understanding that no funeral home had actually been threatened with discipline for an infraction discovered through a photograph.

But, this controversy is a blunder of the Division’s making.  More than 40 years ago, the Missouri Attorney General’s office opined that the Division of Professional Registration does not have the authority to employ, or prohibit the employment of, investigators or inspectors of certain state boards.  (MO 55-80) That opinion involved a challenge from the Missouri Dental Board, which relies on the same enabling statute that authorizes the Missouri State Funeral Board’s  employment of investigators.  (Section 324.001.11(4))  Doesn’t the Division have a legal staff to vet these types of issues?  Granted, association members may have egged the Division on about gottcha practices, but ultimately, the State Board should have been given proper latitude to fulfill its responsibilities to the funeral consumers.  If the State Board wants to hire its own investigators, Missouri law gives that authority to the Board, not the Division.

Two consumer groups recently issued failing grades to funeral regulators from 33 states.  Taking the position that state funeral regulators have a duty to serve both professionals and consumers, The Funeral Consumer Alliance and the Consumer Federation of America worked together in evaluating each regulator’s website on the following criteria:

  1. The inclusion of a prominent link to consumer-focused information.
  2. An explanation of a consumer’s basic rights under the Federal Trade Commission’s “Funeral Rule.”
  3. An explanation of a consumer’s rights when buying a prepaid funeral.
  4. Other information about how consumers can optimize their purchase of funeral services, including links to the FTC website or publications on “Shopping for Funeral Services”.
  5. A prominent link for consumers wanting to file a complaint.
  6. The ability to see whether a funeral home has been subject to disciplinary action by the regulatory body.

In a report titled “An Evaluation of Consumer Information Provided by State Funeral Regulators”, these consumer groups found that most regulatory websites focus exclusively on educating funeral licensees.  The report includes recommendations to those state funeral regulators who need to do a better job educating the public.  These consumer groups also offer this brochure for funeral consumers.

We believe three fiduciary powers are crucial to reviving cemetery care funds: investment diversification, unitrust elections and the power to adjust.  It has been more than 12 years since we first posted about the need to repair cemetery care funds (Cemetery Endowed Care Funds and the Fixed Income Investment).  That post touched on all three of the aforementioned powers.  We made that post when Missouri was considering legislation that would authorize diversification and unitrust elections for a very small subset of Missouri cemeteries.  The legislation only benefited Missouri cemeteries that were licensed as endowed care cemeteries.  Cemeteries operated by cities, counties, churches and associations were left out.  (As explained in a May 2020 post, less than 10% of Missouri cemeteries are licensed.)  The legislation also gave the unitrust election to cemetery operators rather than care fund fiduciaries.  Perhaps out a fear that fiduciaries would override the operator’s unitrust election, the bill took away the fiduciary’s power to adjust.  Oddly, the legislation did not include safeguards for the care fund principal or corpus when the operator takes the unitrust election.  After 12 years, it’s time for Missouri to fix its cemetery care funds.

First up, all care fund fiduciaries should be granted the authority to diversify trust assets.  Missouri’s 2009 Chapter 214 legislation did not address investment restrictions imposed on county and municipal care funds.  Eight years later, legislation finally authorized care fund diversification for counties, but did not address city owned cemeteries.  Today, Missouri cities still face very restrictive investment guidelines for their cemetery care funds.  Missouri is not the only state to impose antiquated investment restrictions on government operated cemeteries.  Without productive care funds, cities are forced to spend scarce tax revenues on cemetery maintenance.

We made numerous posts over the past dozen years about the historic dependency of cemetery care funds on interest income, and the need for those trusts to pivot to total return trusts and the prudent investor rule.  The unitrust election is essential to converting the care fund trust from an income trust to a total return trust.  In prior posts we’ve discussed how exempt cemeteries (or states without a cemetery unitrust provision) can explore their state trust code for a unitrust provision (or power to adjust provision) for authority to make fixed distributions.  By including express authority in their cemetery laws, states would assure care fund fiduciaries in making fixed distributions when trust assets can be adequately diversified.  But we believe the unitrust election should be the fiduciary’s to make, not the operator.   We understand the regulators’ concern about fixed distributions made from small care funds.  Without a master trust, small care funds may be challenged to adequately diversify.  Accordingly, cemetery laws need to guard against corpus invasion.

Finally, care fund fiduciaries need the power to adjust principal and income.  Unitrust laws generally allow for a fixed distribution range of 3 to 5% of the fund’s fair market value.  Our clients are generally conservative by opting for a 3% distribution.  When the care fund consistently exceeds its 3% distribution rate, cemeteries and trustees need the flexibility to make additional distributions from accrued value increases.   If the care fund performance does not consistently match the fixed distribution rate, the trustee needs the power to adjust the distribution rate to below 3%.   This power would also equip the fiduciary to make extraordinary distributions when the cemetery needs major repairs.

Without these three powers, care fund fiduciaries are deprived the tools to efficiently administer care funds.  When the care fund is underutilized, cemeteries are more likely to fall into disrepair, and eventually, require taxpayer support.

In a recent Washington Post article, supporters of a Lost Cause monument unsuccessfully argued to have a Confederate statue moved from a county courthouse steps to a local cemetery.  The article sets out some of the counter-challenge arguments we described in our prior post.  But eventually the small community of Isle of Wright rejected a recommendation that the Lost Cause monument be relocated to their city cemetery.  Although a cemetery lot owner had offered to donate spaces for the relocation of the statue, the county Board of Supervisors did not feel the monument should remain on property supported by tax dollars.

A historian quoted by the article suggested that the relocation of Lost Cause monuments from public property to cemeteries “seems to only kick the can down the road”.   We agree.   A cemetery is to be a place of tranquility where relatives and friends of the deceased may come to visit for emotional comfort.   Cemetery visitors should not have to shield their eyes from a section of the cemetery as part of a compromise to a false narrative of history.

While the greater public sentiment has turned against statues honoring the Confederacy, cemetery operators should anticipate a counter-challenge to the removal of a Lost Cause monument.  Support for the Lost Cause monument can be just as fervent as the calls for its removal.  With emotions running high in both directions, the removal of the Lost Cause monument should be anchored firmly to cemetery governing documents.  If those documents are ambiguous, the cemetery should first address those weaknesses.

As noted in our prior post, it is universally accepted that a cemetery may amend its rules and regulations to apply retrospectively to existing burial lot owners.  If the rules and regulations do not include an offensive monument provision, one should be added.   The offensive monument provision should include notice procedures where the burial lot owner is not known or uncertain.  Please recall that Lost Cause monuments were often erected on lots purchased by, or gifted to, Confederate memorial societies that no longer exist.  When the lot owner is known, he/she should be given the opportunity to remove the monument.   The rules should authorize the cemetery to proceed with removal when the lot owner does not comply.  When the lot owner is not known or is uncertain, the removal provisions could call for publication notice that allows for interested third parties to accept removal of the Lost Cause monument.  Under those circumstances, the cemetery may want to consider an indemnity provision from any party seeking to assume possession of the monument.   If there are no takers for the Lost Cause monument, the rules should authorize the destruction of the monument without liability to the burial lot owner or anyone claiming an interest in either the lot or the monument.

When rules and regulations need to be amended to include an offensive monument provision, the cemetery should also address ambiguities concerning the limited rights acquired with the purchase of a burial lot.  The rules and regulations (and burial contract and IR assignment form if necessary) should clearly state that ownership of a burial lot conveys only the right to inter human remains and to memorialize that individual.  The rules should also set out the procedures and requirements for transfers of burial lots.

Lost Cause monument supporters will likely argue that the statue’s removal amounts to a violation of private property rights and free speech.  That is an argument erroneously based on fee simple property rights.  Cemetery governing documents should clearly refute that misconception.  Burial lot owners have limited rights.

Lost Cause supporters may also assert that a Confederate monument should be retained to honor history and valiant soldiers.  That ignores that the Lost Cause is a false narrative and Lost Cause monuments were typically erected without specific reference to a fallen soldier.  The reality is that such monuments are a violation of a cemetery’s purpose, and it was a mistake to allow them in the first place.   It is time to correct that mistake.