“Allegiant [Bank] violated the industry standard of care by not maintaining consumer-level deposit records, because, as here, where there are multiple beneficiaries of a trust, the trustee must keep records of the individual deposits made for each consumer.”

This finding by the trial court in the NPS civil trial had to come as a shock to Allegiant Bank, and would probably come as a surprise to many preneed trustees.  With regard to the trustee’s recordkeeping requirements, both the NPS trust agreement[1] and applicable Missouri state preneed laws[2] incorporated typical industry standards. The Allegiant Bank trust officer believed that the records produced by the bank’s trust accounting system would suffice for compliance with the trust agreement and Missouri law.

During its 6 year term as the NPS trustee, Allegiant Bank did not request or maintain records of the deposit balances of the individual contract beneficiaries.  Allegiant Bank assumed that it could rely upon NPS to provide individual deposit balances upon request.  The trust officer believed he was not required by either the trust agreement or Missouri law to keep specific customer account information.  The trial court disagreed, finding that though Missouri law imposes a duty on the preneed seller to create a record of consumer payments and deposits, the statute does not abrogate the trustee’s duty to maintain records of deposits to the trust after that information is obtained from the seller.

The trial court reasoned that without keeping records of the deposit activity, the trustee could not reconcile trust transactions to determine if distribution requests were accurate.  The trial court did not find that the trustee has to create such individual consumer deposit records, but rather the trustee must seek such records from the seller and then keep them for purposes of reconciliation of distributions.

Click this hyperlink to view excerpts from the Findings of Fact and Law that discuss the individual deposit recordkeeping requirement.

[1] . Section 4.3 of the Trust Agreement stated: “Trustee shall at all times maintain accurate books and records reflecting all transactions in any way pertaining to the trust.”

[2] The first sentence of Section 436.031.5 read, “The Trustee of a preneed trust shall maintain adequate books of accounts of all transactions administered through the trust and pertaining to the trust generally.”