It was once fairly common for a funeral director to take a preneed purchaser’s funds and establish a joint account at a local bank.  Missouri’s preneed law contemplates the transaction and requires that the funeral home and the purchaser have joint control over the account.  Prior to 9/11, banks would freely provide account forms, allowing the funeral director to obtain the purchaser’s information and signature at the funeral home.  However, the security requirements imposed on banks by the USA Patriot Act have probably made the joint account an impractical method to funding a preneed contract. 

A few years ago, banks were required to implement programs to collect more information about their customers and to verify their identities.  The purpose of these new requirements was to prevent money laundering that could involve the financing of terrorism. 

What this means to the funeral director is that he/she can no longer prepare bank account applications at the funeral home.  All parties to the account must be present at the bank when the account is opened.  I have encountered one bank that interpreted the Patriot Act to prohibit the joint account arrangement contemplated by Missouri law.  

While the joint account provided a funding mechanism to funeral directors who did not have the volume of preneed business to warrant the expense of trusting or insurance, there are ample indications the arrangement has been abused and may need to be discontinued.  An unknown number of funeral homes have rolled joint account contracts to NPS.  Unwittingly, some funeral homes have combined multiple contracts in a single certificate of deposit, exposing the consumers’ funds to the claims of the funeral home’s creditors.  

As states seek to respond to the NPS failure by tightening preneed laws regarding trusting and insurance, consideration must be given to how a safe and affordable preneed arrangement can be offered to the rural consumer.