Like most states’ preneed laws, Missouri’s Chapter 436 has always contemplated a depository accounts for the small funeral operator who provides preneed as an accommodation. Many funeral homes do not sell enough preneed to warrant the expense and hassle of either a trust or an insurance license. Chapter 436 allows the funeral director to place 100% of the consumer’s funds into a joint depository account at a bank.
Despite certain glaring problems with the joint account contract, the Missouri legislature preserved the structure when it passed SB1, and re-wrote Chapter 436.
The small operator often accepts the consumer’s funds for purposes of a ‘spend down’ that will allow the consumer to exclude the funds from his/her resources for public assistance. Technically, the joint account requirements are not sufficient for excluding the funds, and funeral director is required to set up the account as “for the benefit of”. In doing so, the funeral director has not complied with Chapter 436 (old or new).
Because the transaction is an accommodation, the funeral director has little incentive to incur expense. Consequently, Missouri funeral directors ‘tend’ to borrow from each other with regard to documentation. While Chapter 436 has always required a contract form specific to joint account funding, antidotal evidence suggests many funeral directors borrowed a trust funded contract form for their joint account contracts.
SB1 requires the State Board to examine or audit all preneed sellers, including funeral homes that have joint accounts but decline to become licensed as sellers. This puts Missouri’s regulators in the difficult situation of citing small operators for Chapter 436 violations despite having all of the consumer’s funds in a depository account at the bank. For the integrity of preneed reform, the State Board cannot look the other way with regard to the joint account requirements.
Rather than force the small operator into either of the remaining SB1 options, Missouri should explore a new option for small operator.