This time last year, the hot topic before the Missouri State Board of Embalmers and Funeral Directors was the staff’s proposed regulation to define what constitutes adequate records of a preneed seller. The proposal was revised more than once during 2016, but it was eventually tabled by the Board before any consensus could be… Continue Reading
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The MFT Complaint: Rollovers and Sellers
Posted in Administration, Exams/audits, Missouri - SB1, RecordkeepingIn our prior post, we looked at Paragraphs 39 through 52 of the Complaint filed against the Missouri Funeral Trust, and the implications of Missouri’s Common Trust Fund law. In this post we will look at paragraphs 79 through 95 of the State Board Complaint, and what exposures rollover funeral homes could have. The Complaint… Continue Reading
The MFT Complaint: Rollovers and Common Trust Funds
Posted in Administration, Investments, Recordkeeping, ReportingIn paragraphs 39 through 52, and paragraphs 79 through 95, of the Complaint filed against the Missouri Funeral Trust, the State Board of Embalmers and Funeral Directors raises issues with regard to the preneed trusts that were transferred by funeral homes to MFT. The re-write of Missouri’s preneed law in 2009 provided the MFT an… Continue Reading
Preneed Trusts and Value Allocations: Total Return vs Income Return
Posted in Administration, Compliance, Investments, Total Return TrustAs discussed in our prior post, funeral homes are becoming increasingly dependent upon their preneed trustee for individual account administration. Many trustees that provide account administration rely upon programs that use tax cost basis accounting. (For a prior discussion of tax cost basis see “Consumer Options and Administrative Hurdles: Market Value Allocations”.) Tax cost accounting… Continue Reading
Preneed Trust Income: What Accounting Rules?
Posted in Administration, Compliance, Missouri - SB1A Missouri funeral home client recently had a consumer with a trust funded contract cancel their prearranged funeral and request a refund. The contract was sold subsequent to the 2009 law change, which provides the consumer a refund equal to all payments in excess of a 5% origination fee. Missouri law allows sellers to withdraw… Continue Reading
New Missouri Preneed Recordkeeping Requirements: base records and uniformity
Posted in Administration, Compliance, Exams/audits, Recordkeeping, ReportingThe Missouri State Board of Embalmers and Funeral Directors will meet December 9th, and their agenda includes a proposed regulation for new preneed recordkeeping requirements. Borrowing perhaps from other states’ preneed audit manuals, the regulation sets out a list of journals, ledgers, documents that a preneed seller would be required to maintain. For an industry… Continue Reading
Preneed Trust Shortages: Deposit Plus Accounting
Posted in Administration, Compliance, Legislation, Missouri - SB1During its state convention, the executive director for the Missouri Funeral Director and Embalmers Association stated that their master trust program would have a $3 million dollar surplus if all preneed contract beneficiaries were to die that day. If the Missouri program were being administered pursuant to common trust fund rules, there should not be… Continue Reading
Preneed Contracts: Where to Apply a Discount
Posted in Administration, Exams/audits, Guaranteed, Non-guaranteed, Preneed, Trust FundedIt is common for a funeral home to offer a discount to a preneed contract purchaser when the sales price is to be paid in full at the time of purchase. However, funeral homes are often inconsistent in how the discount is applied to the preneed contract. We have seen the discount recorded as a… Continue Reading
NPS Trustees: Standard of Care for Preneed Administration
Posted in Administration, Compliance, Missouri - SB1, NPS/Lincoln, RecordkeepingFinal arguments were heard in the NPS civil trial this past Friday. With the SDR having presented evidence through the prior Friday, the defendant trustees presented their case in less than a week. This may reflect that the NPS trustees had viewed their duties as having been defined by Chapter 436 as relatively low. As… Continue Reading
Questions for the Jury: the mirror trust account
Posted in Administration, Compliance, Investments, NPS/LincolnA recent order issued by the Federal Court trying the NPS civil suit referenced a mirror trust employed by the defendant bank (12-31-14 Order – Comerica MSJ ). To facilitate the trading of investment securities, a brokerage account is established with a firm that can administer the transactions more efficiently than the fiduciary institution. The fiduciary… Continue Reading
Getting Personal: liability and the preneed trust officer
Posted in Administration, Compliance, Investments, Master Trusts, NPS/LincolnEarlier this week, the Federal Court that is to try the NPS civil lawsuit next month issued an order (Order denying Morisse JOP Mtn) that will raise red flags for the banks that serve as preneed trustees. In denying the motion of an officer of Allegiant Bank, Judge Richard Webber held that the Special Deputy Receiver… Continue Reading
Consumers Payment Options: Administrative Hurdles and Preneed Trusts
Posted in Administration, Associations, Compliance, Master Trusts, Non-guaranteed, NPS/Lincoln, Recordkeeping, Trust FundedThere are three scenarios for administration of preneed installment payments: the funeral operator collects payments, the trustee collects payments or a third party administrator collects payments. The entity collecting installment payments must be able to apply each payment to the correct preneed account, and provide the other party (or parties) current payment balances. If the… Continue Reading
Consumer Options and Administrative Hurdles: Market Value Allocations
Posted in Administration, Associations, Compliance, Master Trusts, Total Return TrustThe conventional guaranteed preneed transaction is premised upon investment returns offsetting performance cost increases to the funeral home. Many funeral homes restrict consumers to single payment preneed contracts to limit their exposure to funding short falls. If the funeral home allows the consumer to pay the preneed purchase price over 60 months, the preneed trust… Continue Reading
Trust Administrative Hurdles: Tax Allocations
Posted in Administration, Compliance, Taxes, UncategorizedA few weeks ago, we discussed the need to offer to consumers new preneed funding options, and outlined the various administrative hurdles faced by funeral homes that rely upon trust funding. (Preneed Trust Options: Administrative Limitations) With this post, we will examine how the non-guaranteed option impacts tax allocations and makes spreadsheet administration impractical. In… Continue Reading
The Medicare Tax and QFTs: Don’t look a gift horse in the mouth
Posted in Administration, Preneed, Preneed Tax, Taxes, Trust FundedOver the past few years, preneed trust administrators have been wondering whether a Section 685 qualified funeral trust could look to each individual trust’s income and apply the lower tax rates for long term capital gains and qualified dividends. The issue has taken on more relevance as preneed trusts look to diversify out of fixed… Continue Reading
Checks and Balances: Who has your back?
Posted in Administration, Fiduciary, Master Trusts, PreneedIn the days that followed the Wisconsin Funeral Directors Association being placed into receivership, some of the WFDA’s sister associations were quick to point out they had ‘checks and balances’ that would protect consumers’ funds from the problems that tripped up the Wisconsin Funeral Trust. As we reported in our last post, a crucial ‘check… Continue Reading
A Call to Mark to Market: The NFDA
Posted in Administration, IFDA, Master Trusts, PreneedA short three and a half years ago, the funeral industry reeled from the collapse of National Prearranged Services and the emerging story of the Illinois Master Trust. The NFDA was slow to respond to the crisis, and when it did, this blog joined the criticism. Fast forward to September 2012, and the NFDA responds… Continue Reading
Cemeteries: the insurance void
Posted in Administration, Cemeteries, Funeral, PreneedFor obvious reasons, life insurance is the preneed funding choice for many funeral directors. One hundred percent trusting laws give proactive preneed organizations no choice but to use insurance funding. Insurance provides the commissions needed to finance marketing and a sales force, and, maybe as important, relieves the funeral home from preneed accounting and administration.… Continue Reading
The Independent Preneed Trustee: In a Perfect World
Posted in Administration, Exams/audits, Master Trusts, Preneed, RecordkeepingA breakdown in communications between the CFDA and the Cemetery and Funeral Bureau has resulted in the California Attorney General filing a lawsuit that can be appropriately described as vitriolic. The “California lawsuit” could provide some valuable ‘what to avoid” lessons for regulators in other states. In an unusual move, the Bureau went “public” last… Continue Reading
Preneed Reporting: drilling down to each consumer
Posted in Administration, Funeral, IFDA, Preneed, Recordkeeping, ReportingFor most Illinois funeral homes, March 15th is the due date for the filing of their preneed data with the Comptroller’s office. For those funeral homes that bolted from the IFDA after the master trust melt down, this has been an extremely frustrating process. The majority of funeral homes must file on line, with supporting… Continue Reading
We were too busy
Posted in Administration, Compliance, Preneed, RecordkeepingThe Texas preneed regulator may have left some consumers scratching their head. On September 16th, the Department of Banking issued a press release that a cease and desist order had been issued to prohibit a Lubbock funeral home from selling trust-funded prepaid funeral contracts. But, a Lubbock newspaper reported comments from the Department of Banking… Continue Reading
A Reasonable and Necessary Trustee Fee: penny wise and pound foolish
Posted in Administration, Fiduciary, PreneedThe Special Deputy Receiver for NPS recently reported the company’s “negative net worth” to be just short of one billion dollars. Rightfully, regulators are looking at the NPS fiduciaries for culpability in the losses that will be sustained by consumers and funeral homes in the years to come. In the meantime, Missouri state officials are working with… Continue Reading