The next claim made in the Missouri State Board Complaint against the Missouri Funeral Trust is that the program is holding funds for preneed contracts that have either been serviced or canceled.   The Complaint cites Section 436.456 as legally requiring the MFT trustee to distribute an account’s funds when it receives documentation that the contract has been canceled or performed.

Based on personal experience, we suspect that funeral homes are deferring distribution requests from the MFT trust.  With banks paying low interest rates, funeral homes are probably getting a better return on their MFT account than what they would get when depositing the distribution at the local bank.   Funeral homes will even front the refund owed a consumer on preneed contract cancellations.

Putting aside the requirements of Section 436.456, a problem with the practice of deferring trust distributions is that funeral directors forget about these accounts.   These accounts can become a source of litigation when the funeral home changes ownership and the prior owner failed to withdraw the accounts before making representation and warranties in the sales documents.   The new owner will view those accounts as assets of the business.

From the regulator’s point of view, the practice makes auditing more difficult.