In Paragraphs 35 through 38 of the Complaint filed against the Missouri Funeral Trust, the State Board of Embalmers and Funeral Directors seek discipline against MFT for its inability to produce copies of contracts sold by a funeral home that transferred its trust to MFT. The original seller funeral home apparently amended several of its preneed contracts, and did not retain the original contracts. The Complaint asserts that because the MFT trust holds the assets of those preneed contracts, MFT has assumed all of the “seller” responsibilities of the funeral home. Paragraph 38 also states that the MFT did not have an agreement with seller funeral home regarding the administration of the assets held for the preneed contracts.
The allegations made in this part of the Complaint are a lead in to what may be the strongest argument of the Complaint: rollovers. The re-write of Missouri’s preneed law in 2009 provided the MFT an opportunity to invite funeral homes to rollover their existing preneed trusts into the MFT program. The Complaint suggests that these rollovers were not documented. We’ll look at the rollover issues in our next post, but the missing contract allegation has ramifications for any seller that takes over the trust of another funeral home.
When there is an acquisition between two funeral homes, Section 436.500 requires approval be obtained with regard to the outstanding preneed contracts of the acquired funeral home. The section requires notification that includes:
(1) A notarized and signed statement from the person assuming or agreeing to assume the obligations of the seller indicating that the assuming seller has been provided with a copy of the seller’s final annual report and has consented to assuming the outstanding obligations of the seller;
(2) In lieu of the notarized statement required by subdivision (1) of this subsection, the seller may file a plan detailing how the assets of the seller will be set aside and used to service all outstanding preneed contracts sold by the seller;
In years past, the State Board had taken the position that the assumption form contemplated by subparagraph (1) required the acquiring funeral home to make good on all seller responsibilities, including funding deficiencies of the prior funeral home. But, under subparagraph (2), the acquiring funeral home can limit its duties with a plan that sets out how the assets are to be administered, and how the preneed contracts are to be serviced.
In the absence of a written plan, the State Board seeks to hold the MFT accountable for the prior seller’s record keeping responsibilities. Missouri funeral homes need to pay heed, and use the “plan” option of section 436.500.