As suggested in our prior Cemetery Preneed Exemption post, Missouri’s endowed care cemetery law (Chapter 214.270 et seq) has a huge flaw when it comes to religious cemeteries: they are either all in or all out. Religious cemeteries often have good cause for seeking exemption from state endowed care laws. Our religious cemetery clients typically have care trusts that do not comply with state law for one reason or another. One client’s care trust held farmland. Another client trust included provisions for withdrawal for the benefit of the church. Several clients maintained co-trustee relationships with a corporate trustee.
For the religious cemetery that has a proactive preneed program, Missouri’s all in or all out is a major problem. If a religious cemetery is to be exempt from Missouri endowed care requirements, they must elect to be outside of the entire act, including its preneed provisions (RSMO Section 214.387).
When passed in 1994, the law’s focus was on establishing care funds and consumer disclosures. Little thought was given to the preneed transaction. To be fair to those involved, few cemeteries were offering preneed, and most of those sales were for markers and monuments. Cemeteries offering opening/closing services, vaults and engraving services, could register with the Missouri State Board of Embalmers and Funeral Directors.
Prior to 2009, preneed sellers were not licensed in Missouri. Rather, funeral homes could register as a preneed seller. This would require a preneed trust and a contract that complied with Chapter 436. The State Board did not have audit powers, but a $2 per contract fee was required with the annual registration. The preneed compliance threshold was pretty low, and so several cemeteries registered with the State Board.
Everything changed with the implosion of National Prearranges Services in 2008. A major reform effort was launched for the Missouri funeral industry that included licensing, more detailed reporting, examinations and significant new fees. Seeing the writing on the wall, the cemetery industry quickly scrambled to carve out a Chapter 214 preneed niche for cemeteries. But as we now know, that niche is based on the cemetery being licensed under Chapter 214.
Opting in under Chapter 214 as a non-endowed cemetery is not the answer for religious cemeteries. The disclosures required of a non-endowed Missouri cemetery would be misleading. Many religious cemeteries have a care trust, but just one that does not comply with all Chapter 214 requirements. Yet, we hesitate to recommend a religious cemetery take their preneed cemetery program under Chapter 436.
The administration of a cemetery preneed program is dramatically different than that for a preneed funeral trust. A cemetery preneed trust involves multiple subaccounts and frequent distributions for deliveries made prior to death. (See Cemetery Preneed Oversight: the Bucket Factor) The financial examinations conducted by the Missouri State Board of Embalmers and Funeral Directors will be entering their third stage soon, and more attention will be given to trust administration (and distributions in particular). We could see a Chapter 436 financial exam bogging down when reviewing a cemetery preneed program.
Rather, Missouri’s Chapter 214 needs to be amended to provide more flexibility to religious cemeteries and other exempt cemeteries that want to sell preneed while opting out of the endowed care fund requirements.