Over the past few months, we have been pressing state officials in Illinois and Nebraska on the issue of who is the state’s collection agent for excess preneed funds. Is it the funeral director or the funding source (the preneed trustee or the preneed insurance carrier)?
Back in 2010, the Missouri State Board of Embalmers and Funeral Directors ‘adopted’ the policy of MO HealthNet that the funeral home should be the states collection agent. Illinois and Nebraska seem to be leaning towards making the preneed funding agent responsible. As counsel for preneed fiduciaries, I have been challenging that duty because of positions like that taken by Missouri and Nebraska on other administrative issues: if trust income is insufficient to pay for an account’s administration, the cost of such services must be charged back to the seller. With regard to unique services, I disagree. The costs of collection services should be charged to the excess funds.
If the duty is to be imposed on the funeral home, acting as the state collection agent is not a service that one will find among those included in the non-declinable service charge. Rather, the state collection services are akin to the services described in FTC Funeral Rule Opinion 13-2, where the funeral home would charge a fee collecting insurance proceeds or trust proceeds. When funeral directors ask whether they can charge such a fee, it’s difficult to provide a conclusive answer. Regulators are prone to challenge any fee imposed upon the consumer. Missouri regulators went so far as to include the following language in their preneed law:
A seller may not require the consumer to pay any fees or other charges except as authorized by the provisions of chapter 333, RSMo, and this chapter or other state or federal law.
If states want either the funding agent or the funeral home to police excess preneed funds, they will have to allow those funds to be tapped for our collection services.