We are continuing with our posts to correct the misstatements made by the MFDEA in its May 24th video on Missouri law and preneed portability. At minute 28:50 of the video, the association’s general counsel states that with regard to the transfer of preneed contracts, a successor seller must execute a State Board affidavit and assume all obligations of the preneed contract. The video states that when funding has not kept up with price guarantees the successor seller may not be willing to assume all of the obligations of the contract (honoring the price guarantees). The video suggests that the simple option is to cancel the contract and get a refund.
The problem with this explanation is that it ignores that Section 436.500.2(2) allows an assuming seller to file a plan in lieu of the State Board’s affidavit. We have represented numerous Missouri successor sellers and used a “plan” called an assignment and assumption agreement. Depending upon the available funding to be transferred with the preneed contract, the seller may or may not honor the original price guarantees. In situations where the original seller has impaired or depleted the contract funding through misconduct, the successor seller may offer to enter into new arrangements with the preneed consumer. The State Board may always reject a Section 436.500.2.(2) plan, but this office has never had that happen.
If a successor seller were to accept the video’s recommendation for cancellation, the original seller stands to reap a windfall. For pre-SB1 contract where 100% of the consumer payments were trusted, the seller could keep that 20% and all trust growth. For post SB1 contracts, the seller could keep the 5% origination fee and all trust growth.
This section of the video seems intended to discourage funeral homes from even inquiring about an assumption of their preneed contracts being administered by MFT.