In preceding posts, we have outlined recommendations to the Missouri State Board of Embalmers and Funeral Directors regarding the preneed examination process and record keeping requirements. While our correspondence was not included on the Board’s December 13th agenda, the Board entertained a motion to amend the agenda to include our correspondence on the afternoon open… Continue Reading
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Missouri Seller Records: 2017 Reboot?
Posted in Administration, Compliance, Master Trusts, Missouri - SB1, RecordkeepingThis 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
The $64 Million Dollar Question: Is the Money there?
Posted in Master Trusts, Missouri - SB1While the Missouri State Board of Embalmers and Funeral Directors’ Complaint against the Missouri Funeral Trust alleges the program has failed to maintain adequate records, documents and oversight, funeral directors want to know whether the trust is adequately funded. Although the State Board raised issues with some contracts reported with zero deposit balances, the Complaint does… Continue Reading
Missouri’s Longest Preneed Audit: Continued until October
Posted in Exams/audits, Master Trusts, Missouri - SB1, Recordkeeping, UncategorizedAfter five months of trading Complaints and Answers, the Missouri State Board of Embalmers and Funeral Directors and the Missouri Funeral Trust have been assigned an October hearing date before the Administrative Hearing Commission. The dispute between the State Board and the MFDEA’s master trust program has been waging for years over issues such as… Continue Reading
Missouri Funeral Trust: Time to Put Up or Shut Up?
Posted in Compliance, Exams/audits, Master Trusts, Missouri - SB1The Missouri Funeral Trust now faces the predicament we predicted a few months ago (The MFT’s Catch 22). The Court recently granted the State’s motion to dismiss, and dropped the State Board from the lawsuit. The main motivation for the lawsuit was probably to gain leverage in bringing a long and frustrating audit to a… Continue Reading
The Missouri Fund Manager: What was Grandfathered?
Posted in Associations, Master Trusts, Missouri - SB1There seems to be some confusion in Missouri over the permissible contractual relationships among the preneed seller, the preneed trustee and the independent investment advisor. Prior to the collapse of NPS, and the subsequent amendment of Missouri’s preneed law, Chapter 436 allowed the preneed seller to incorporate provisions in its preneed trust agreement to instruct… Continue Reading
The Missouri Funeral Trust Lawsuit: Is Investment Performance a Trade Secret?
Posted in Master Trusts, Missouri - SB1The MFT did not catch a break with the court assigned to its lawsuit against the Missouri State Board of Embalmers and Funeral Directors and Catholic Fraternal Life. The hearing scheduled for September 28th was continued for another four weeks, and in the meantime, the parties continue to file evidentiary discovery requests. The Association’s preneed… Continue Reading
The Missouri Funeral Trust and its Catch-22
Posted in Compliance, Master Trusts, Missouri - SB1, RecordkeepingA status hearing is scheduled for September 28th in the lawsuit filed by the Missouri Funeral Trust against the State Board of Embalmers and Funeral Directors and Catholic Fraternal Life. The lawsuit is now 4 months removed from the request for a temporary restraining order that, among other relief sought, would stay the financial examination… Continue Reading
The MFT Lawsuit Claims: The Client List
Posted in Associations, Master Trusts, Missouri - SB1, PreneedThe lawsuit brought by the Missouri Funeral Trust against the Missouri State Board of Embalmers and Funeral Directors and CFL Pre-Need includes a number of unique and dubious claims. For example, the lawsuit defines CFL Pre-Need, an insurance company, as a competitor but not funeral home clients that are licensed as a preneed seller. The… Continue Reading
Trust Shortages: Sponsorship Fees
Posted in Associations, Master Trusts, Missouri - SB1It was been almost 7 years since we posted the piece titled “Trade Association Membership: weighing the costs vs. the benefits”. Towards the end of that article, we discuss how the master trust sponsor fee provides a crucial source of revenue to state associations. That post was written subsequent to the dissolution of the Minnesota… Continue Reading
Preneed Trust Shortages: Investment Management Fees
Posted in Associations, Compliance, Investments, Master Trusts, Missouri - SB1One strength of the state association master trust is that it can provide the ‘critical mass’ required for economies of scale to reduce trust management costs. As the state master trust grows in size, the association can better negotiate asset management arrangements. However, the reality has been very different for these programs. The reorganization of… Continue Reading
Missouri Funeral Trust: Seeking a Gag Order
Posted in Associations, Master Trusts, Missouri - SB1On July 27th, a Missouri court will consider a motion filed by the Missouri State Board of Embalmers and Funeral Directors to be dismissed from the lawsuit filed by the Missouri Funeral Trust. One of the allegations made by the Missouri Funeral Trust was that confidential information obtained by a state auditor regarding the program’s weaknesses… Continue Reading
Preneed Trust Shortages: Missouri’s Income Withdrawals
Posted in Exams/audits, Investments, Legislation, Master Trusts, Missouri - SB1, Recordkeeping, Reporting, Trust FundedPrior to Missouri re-writing its preneed law in 2009, preneed sellers could draw off realized income so long as the withdrawal did not reduce the trust’s fair market value below trust deposits. Seeking income, many Missouri sellers directed their trustees to invest in bonds. As interest rates declined during the early part of the prior… Continue Reading
Missouri and Preneed Deficiencies: What is a shortage?
Posted in Legislation, Master Trusts, Missouri - SB1, Preneed Shortfalls, Reporting, Trust FundedAt its June meeting, the Missouri State Board of Embalmers and Funeral Directors gave instructions to their staff to draft legislation that would provide the Board powers to force preneed sellers to contribute funds to their trusts to cover ‘shortages’. The instruction was not without some controversy as one Board member questioned why he was… Continue Reading
Association Master Trusts: De Facto Trustees
Posted in Compliance, Exams/audits, Fiduciary, Investments, Master TrustsAccording to court filings, the reorganization plans for the Wisconsin Master Trust and California Master Trust each seek to eliminate ‘de facto trustee’ relationships that allowed the respective associations’ executives to ‘misuse, misspend, and mismanage millions of dollars’ of trust funds, and to direct funds towards inappropriate and unsuitable investments that served the association’s, rather… Continue Reading
Transparency:The Curious Case of the Missouri Funeral Trust
Posted in Master TrustsIn his final report to the court, the Wisconsin Master Trust receiver proposed a new trust agreement that is intended to provide “transparency, accountability, oversight and prudence”. Similarly, the California Attorney General seeks to provide transparency through express reporting requirements included in the trust agreement proposed to the court presiding over the California Master Trust. … Continue Reading
State Master Trusts: Plans of Reorganization
Posted in Master Trusts, Preneed, Trust FundedTwo of the country’s largest association ran master trusts now have pending plans of reorganization. On May 14th, the receiver appointed for the Wisconsin Master Trust filed a Final Report that outlined to a court his proposal for the reorganization of that program. On May 22nd, a hearing was held in a California on the Attorney… Continue Reading
NPS’ Legacy of Damages: No One Knows How Deep the Waters Were
Posted in Associations, Exams/audits, Master Trusts, Missouri - SB1, NPS/Lincoln, RecordkeepingWhen NPS first collapsed, the estimate of the company’s liabilities to funeral homes was reported to have been as much as a billion dollars. When the SDR finally brought the case to trial, the damages awarded by the jury were less than half of the original estimate. While this author believes the actual damages are… Continue Reading
Question for The Jury: Exculpatory Clauses and Preneed Investment Supervision
Posted in Associations, Investments, Master Trusts, NPS/LincolnIt is common for master preneed trusts to have investments directed by an independent fund manager. The pooling of smaller trusts allows funeral directors to achieve the critical mass needed to engage professional asset management. When investment functions are delegated, the trustee typically wants to be relieved of the supervision and liabilities that accompany those… 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
Rising Interest Rates: A Return to the Good Ole Days?
Posted in Investments, Master Trusts, Trust FundedFor Fed watchers, last week’s announcement signaled a subtle warning that interest rates will likely begin rising by the Summer of 2015. Since September of 2012, Federal Reserve statements have warned that interest rates would remain unchanged for “a considerable time” after the nation’s economic recovery strengthened. The reference to “a considerable time” was dropped… Continue Reading
Investment Advisors: How Independent?
Posted in Compliance, Investments, Master Trusts, NPS/LincolnIn a motion for rulings of law, the NPS Special Deputy Receiver seeks a judicial determination of two legal issues that could impact preneed trustees subject to the jurisdiction of the Eighth Circuit of Federal Court of Appeals: the beneficiary status of preneed purchasers (and funeral homes) and the required independence of investment advisors. These two… 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