An issue lost in the debate whether to confirm the Gubernatorial appointments of Sheila Solon and four members to the State Board of Embalmers and Funeral Directors is the autonomy granted to state boards by the Missouri Legislature through RSMo. Section 324.001.11.  Through subsections (3) and (4) the Legislature limits the Division of Professional  Registration’s authorities over the management functions of certain boards and commissions (including the State Board of Embalmers and Funeral Directors), and vests in those boards and commissions the authority to hire and retain non-clerical personnel.  For much of 2021, acting director Solon and the State Board argued over inspectors.   Open records requests have produced numerous emails documenting the Board’s executive director’s requests for an explanation why the Board could not hire its own inspector.   The Division and the Department of Commerce and Insurance simply stalled those requests or lied to the Board’s executive director.  When the State Board sought to hire an attorney to defend its authorities under Section 324.001.11, the Division then began looking for replacements for the four Board members serving on expired terms, advising the Governor that changes were needed “especially with inspections and financial examinations”, and that there could be potential cost savings of $200,000.

If the State Board were ineffective or inefficient in conducting funeral home inspections and preneed audits, the Division should first have gone on record with the State Board that changes were needed.  If the dispute between the State Board and the Division then continued, the Division should then have gone to the Senate Committee on Professional Registration Oversight.  The disputing parties would then have the Senate Committee’s input.  Instead, the Division ignored Missouri law and took matters into her hands and misinformed the Governor.

This past August we received an email from the Gottcha Board asking about availability to attend a closed meeting call.  Anticipating a client was in trouble, we responded that we would accommodate the Board’s request.  However, the Board’s purpose for the call was to make an inquiry about representation to resolve the dispute with the Division over personnel and budget authorities.

Without disclosing the Sweeny-Phillips litigation, the Board recounted how the Division had rejected the Board’s requests to hire an additional inspector.  Initially the Division had advised the Board that it lacked authority to hire personnel.  After our posting of Missouri Funeral Home Inspections and Pictures:  You Were Warned!  the Division changed its stance and advised the Board that it had given up control over its personnel budget.  The Board’s executive director had made numerous inquiries to the Division and to the Department of Commerce and Insurance seeking documentation of that delegation of authority over its budget, but nothing was produced by either the Division or DCI.

The Board perceived that litigation was their only avenue to getting to the truth about the authorities it possessed over inspections and audits.  However, we suggested that before litigation was brought the Board should make open records requests to confirm whether or not a past Board had actually delegated their budget authority.  The open requests could also determine if there was any complicity among key Division officials.  The Board agreed and then went about getting Division authority to hire our office for those open records requests.  But as the MFDEA predicted, the Board’s inquiry was not well received, and the Governor replaced most of the Board.

While the sacking of the Board and the executive director may have been predictable, the inclusion of the preneed exam supervisor in the bloodletting signaled that something more than a tiff over funeral home inspections was at play.  Accordingly, we proceeded with the open records requests recommended to Board, and the long awaited results included some surprises.

We made requests to the State Board for the infamous October 14th script, to the Division for the Board’s delegation of budget authority and to the DCI for Board requests regarding budget, personnel and legal counsel.   The State Board and Division responses were quick and predictable.  The new State Board response was: “What script?”  Well, the script that the Board chairman complained had been stolen from his personal papers.  If it will help here is that Russell complaint.

During the October 14th Board meeting, I asked the Division attorney what the Division was relying upon when asserting that the Board had delegated their authority over personnel funding and Ms. Ledgerwood advised that there was a 1999 Board action.  In response to our request for any 1999 document whereby the Gottcha Board had given up its authority over personnel funding, the Division replied no such document existed.

In contrast, the Department of Commerce and Insurance advised that their responses to the requests would take several weeks.  Jump forward two months to this week, the DCI produced hundreds of pages of communications and documents.  From the DCI records we found weekly reports from the Division to the Governor that suggested a plan to streamline the Division, starting with the Embalmers board.  The Division director advised the Governor that changes were needed to be made “to increase efficiency and fiscal responsibility.”  Improvements were needed, “especially with inspections and financial examinations”, and that there could be potential cost savings of $200,000.  The weekly report also advised the Governor:

 The Division is working with Kyle Aubuchon and Caroline Colter on filling vacancies and replacing board members on expired terms for the Embalmers board and several others. The Division appreciates that people have been willing to serve on expired terms but the Division is excited to have new members who bring new ideas and expertise to protect the people of Missouri.  

In a weekly report to the Governor that followed the October 14th Board meeting, the Division was complementary of the Missouri Embalmers and Funeral Directors Association for their assistance.  But what may be more telling of the DCI records disclosure were communications that never occurred.

While cutting expenses and streamlining government are noble objectives, no one approached the Gottcha Board with the plan and a request for recommendations.  Rather, the Division and the DCI implemented a plan for cost cutting behind the Board’s back.  When the Board made inquiries about their budget and their personnel authorities, the Division and the DCI stonewalled the Board.

Also missing from the DCI records was a 1999 Board action delegating its budget authority.  Rather, there was a 1998 Board report explaining that the 1999 budget projections would include increasing litigation costs, thus reducing the amount of Board revenues being transfer under the Hancock Amendment to the State’s General Revenue Fund.  The records include other minutes reflecting actions taken by the Board to mitigate the transfers of revenues to the General Revenue Fund.

The DCI records are also void of any notice to the Governor that the Division cost cutting plan had encountered a slight hiccup with a Warrensburg funeral home.  While the Governor is led to believe the new Board appointees bring “new ideas and expertise” to protect the people of Missouri, the reality reflects two appointees that do not satisfy the statutory requirements for serving on the Board.

Our conclusions are the Division made a serious misstep by implementing a cost cutting plan without including the Gottcha Board in the process.  Someone failed to advise the Divison’s acting director that the majority of the Board’s budget comes from the Missouri preneed consumer.  With a 2021 projected budget of $513,795.00, the preneed consumer audit fees account for $397,500.00.  With Senate Bill No.1, the Missouri Legislature authorized the consumer fee to provide the Board the funds to audit the funeral homes for compliance with the new law.  It was not the Legislature’s intent that the Division cut the Board expenditures to the bone so that consumer audit funding would pour over to the State’s General Revenue Fund.

Then the Division compounded that error by attempting to cover up the Sweeney-Phillips affair.   The public litigation filings did not disclose that the Division’s CIU investigators had been dropping the ball for years.   A Board lawsuit would have brought the CIU’s failures to the public’s attention, and undermine the Division’s representations to the Governor.  Accordingly, the Division dismissed the Sweeney-Phillips lawsuit as discovery of the preneed issues was about to commence.

As the MFDEA continues to remind anyone who will listen, it was political suicide for the Gottcha Board to threaten the State.  However, I don’t think those Board members have any regrets for standing up for the Missouri consumer.

This past Friday morning, news outlets across the country picked up an Associated Press story regarding Governor Parson’s October ouster of Missouri’s Gottcha Board.  (For those not familiar with the Missouri State Board of Embalmers and Funeral Directors, the tag “Gottcha Board” was first given to the Board in 2020 by the Missouri Funeral Directors Association.  Then later in 2021, the term was also adopted by the acting executive director of the Missouri Division of Professional Registration (Division).)  While the article delves deeply in to the funeral home inspections that sparked the current controversy, there is much more to the Sweeny-Phillips story.

This funeral home first got into trouble with the Gottcha Board in 2016 when it failed to renew their seller and provider licenses.  Over the span of two years, the funeral home ignored repeated demands from the Gottcha Board and eventually an administrative proceeding was initiated by the Board in 2018.  The funeral home eventually agreed to two years’ probation and to comply with all the licensing requirements of Chapters 333 and 436.  Prior to that agreement, the Division’s CIU inspections had not highlighted to the Board any problems at the funeral home.

With the 2 year probation about to expire, CIU inspectors were sent to Sweeney-Phillips on June 17, 2020 to determine whether the funeral home had complied with the terms of probation.  The CIU inspectors confirmed that the funeral home still did not have either a seller or a provider license, and that the funeral director in charge had failed to renew his license.  The CIU inspectors also reported that the funeral home had not retained (or obtained) authorizations to embalm or cremate.    The Board wrote the funeral home on June 23rd seeking a response to the violations.  The funeral home did not reply.

On July 27th, the Board sent its own inspector to the funeral home and found a multitude of violations that the CIU inspectors had missed, including the condition of the crematory chamber.  The funeral home had 45 preneed contracts without a license.  Two funeral home employees arranged and worked more than a hundred funerals without funeral director licenses.  The funeral home had provided numerous cremations and embalmings without the required documented authorizations.   All of these constituted violations of the funeral home’s probation agreement. (Click to access the Petition)

Despite the nickname given by the MFDEA, the Gottcha Board gives licensees an opportunity to explain themselves before disciplinary actions are pursued.   But it was not until after the Board filed a lawsuit that the funeral home began to take corrective actions.  The crematory was repaired and one of the employees obtained their funeral director license.  However, the other employee who had acted as a funeral director for more than 50 arrangements had not obtained a license.  Nor did the funeral home address its preneed violations.

Based on the preneed sales cited in the petition, we would estimate that Sweeney-Phillips had more than $300,000 in preneed sales since losing their preneed seller license.   While the Gottcha Board wanted to determine if those funds went into trust and stayed there until the contracts were performed, the Division overruled the Board and decided to let the funeral home off.   The Sweeney-Phillips lawsuit was dismissed November 30th.  So much for the SB1 promises made to preneed consumers twelve years ago.

The MFDEA’s response to its membership was to suggest that the article is biased because the reporter was influenced by persons who are anti-Division and/or anti-Governor Parsons.  It is obvious that the association attempted to spin the same yarn given to the Division, but the reporter would have no part of that.  The Division took a smarter strategy and refused to comment.   The Division has taken a similar defense to all the open records requests that we have made of it.  But, that is for a future post.

If the comment section to the Post Dispatch’s website is a barometer, the Missouri funeral industry is taking a hit.  Indirectly, the damage is self-inflicted. The Gottcha Board was attempting to do what it believed to be required for the protection of the funeral consumer.  The Sweeney-Phillips case demonstrated that the Board needed its own inspectors to rout out serious problems.   But, the MFDEA came up with the catchy “Gottcha Board” label, and complained to the Governor.  Then when a new Division acting director was appointed, the MFDEA found a sympathetic ear.  The rest is history.

Despite what some may say, the State Board shake up and the termination of its executive director came as a surprise.  But the most surprising move by the Division was the termination of Randall Jennings, the preneed examination supervisor.  The examination supervisor had no role whatsoever in the funeral home inspection process.  Baffled by that development, I went to a source that is in the know about how Jefferson City works.  Respecting the anonymity sought by this source, all I can offer is that a preneed seller had complained that the exam supervisor had referred to him with a derisive political adjective.

Over the course of the past 10 years, my clients have been through dozens of preneed financial examinations.  Those examinations had put me in contact with Mr. Jennings numerous times.  In some situations, this meant meeting with Mr. Jennings at the client’s office to discuss seller records and the procedures to be followed.  In each such meeting, Mr. Jennings behaved in a courteous and professional manner.  While a few clients complained about the onsite examination being an imposition on their time, none complained about Mr. Jennings’ demeanor.

Acknowledging that this source has an irrefutable reputation within the industry, I can’t help but think that the complaining preneed seller had other cause for going to the Governor or the Division.  Seeking to capitalize on the Governor’s displeasure over funeral home inspections, the seller planted another issue to address with a State Board housecleaning.  If the allegation had been handled appropriately, the Division would have referred it to the State Board when it had members familiar with Mr. Jennings and the preneed seller.  But instead, the Governor stacked the Board and the Division directed the terminations of the only two Board employees involved with the preneed reform efforts since the passage of Senate Bill No. 1.

For those who have forgotten, Senate Bill No. 1 was heralded by the Missouri Legislature as the reform that would protect Missouri preneed consumers (Senator Delbert Scott’s Press Release).  The Columbia Missourian reported how the new law authorized regular and random state audits of prepaid funeral sellers to ensure consumer funds remained in trust until funerals were paid for.

How does the State of Missouri propose to fulfill its promises of protection to the preneed consumers when the State Board is stripped of all employees with examination experience?  Will the Governor follow Harry’s lead and state the Buck stops at his desk?

The State of Missouri seems hell-bent on creating work for Jefferson City attorneys.  As we reported earlier this summer (You were Warned!), the Division of Professional Registration blundered in its first move to control how the State Board of Embalmers and Funeral Directors conducts inspections of funeral homes.  Since then, the Division has also declared the State Board (in 1999) ceded control of its personnel budget, and lacks the funding to hire its own inspectors.  (We will follow up on this claim later because it would seem the Division should have documentation to back up such an assertion.)  Even though the State Board suspended non-essential inspections until its authorities over personnel and funding could be sorted out, the Division delivered a fait de complis to unwanted funeral home inspections by stacking the State Board with 4 new members, and then sacking the Board’s executive director and preneed audit supervisor.  (Underline that latter position, and we’ll come back to it in a future post.)

You may be asking how this benefits Jeff City attorneys.  During a heated discussion at the State Board’s last meeting  challenges were made to two new Board members about their qualifications to serve.  Section 333.151 sets out the statutory requirements for serving on the State Board, and they include that the appointee be licensed as either a funeral director or an embalmer, and have been actively engaged as such for a period of five years preceding the appointment.  While all three new industry board members are licensed, two do not seem to meet the 5 year active engagement requirement.  One of the new board members advised he had perhaps embalmed a body during the past 5 years.  Another new board member acknowledged she was a full time pharmacist at a hospital.   The State should anticipate that licensees threatened with discipline will likely challenge the Board’s legitimacy and authority to the Administrative Hearing Commission.   This same authority and legitimacy issue will undoubtedly be raised by attorneys bringing wrongful terminations of the State Board staff.  And conceivably, this qualification issue casts a shadow on the legitimacy of every license issued by the State Board subsequent to Governor’s appointment of these two individuals.  No wonder some attorneys make a living off lawsuits against the government.

Rumors are also running rampant that the Division had been actively recruiting State Board candidates that would follow orders.  Concern for Division retribution would seal to silence those funeral directors who may have been approached.  But the rumor may have been unwittingly validated by the Division.  Last Thursday’s Board was started with the disclosure that  script provided to the newly appointed Board members had been leaked.  And per the script, the new Board members voted as the majority block to go into closed session to fire the staff.  We have not yet obtained the ‘script’ but will be making open record requests of the new board members, the State Board and the Division.    [We’ll come back in a future post about how if accurate this constitutes a gross violation of Missouri’s Sunshine Law.  But then again, it has only been a few short years back to when a prior Board chairman and Executive Director also violated the Sunshine Law in attempts to influence Board decisions.]

All of this started more than a year ago when MFDEA accused the State Board of gotcha tactics when conducting inspections.  In defense of the Board, they had stated a preference to hire and train its own inspectors, and thus avoid the picture taking.   It was suggested that disgruntled funeral homes were complaining to Governor Parsons, and he wanted an end to the picture taking.   With the practice having been tabled, why then stack the Board and terminate the staff?  Had all this come to be because the Board stepped on the toes of a Governor ally?   And if this had to do with gottcha inspections, why terminate the preneed audit supervisor?   The next phase of preneed audits was to have included an expanded role for the Board inspectors.  Sacking the staff will likely set the preneed audit process back a few years.  (We’ll dive into this aspect in a future post.)


On August 30, 2021, the legal saga of National Prearranged Services came to a rather anticlimactic conclusion.  In a relatively short decision, the Eighth Circuit Court of Appeals affirmed Judge Richard Webber’s July 2019 judgment that awarded $102,135,393.07 damages against PNC Bank, a successor to the NPS preneed trusts.  The final damages award is a far cry from the original judgment of $490 million awarded by a jury in May 2015.  The hopes of funeral directors were quickly dashed when PNC Bank successfully appealed the 2015 judgment and was granted a new trial.  Confined to breach of trust claims against PNC Bank (and not tort claims), the trial court found Allegiant Bank guilty of several fiduciary breaches.  Without the tort claims, the trial court was limited as to what damages could be awarded, and the award was reduced by $390 million.    Funeral homes hoping to share in the original damages award will be disappointed.

For preneed fiduciaries, the Eighth Circuit’s decision affirmed all of the trial court’s findings regarding Allegiant’s breaches of trustee duties.  The trial court’s findings of facts covered 305 pages, and we summarized some of those fiduciary breaches in three posts made in August 2019.  Paramount among those duties was the due diligence required for “know your client”.   The trial court also faulted Allegiant for its failure to maintain or supervise consumer level deposit records.  The appeals decision affirms that the days of treating the preneed trust as custodian in nature are long gone

Since the onset of Covid, the death care industry has experienced an uptick in preneed sales.  As witnessed recently on the Bankrate website, the financial planning industry has taken notice.  Bankrate is a website that provides comparisons of various financial products, and recently posted an article titled “The pros and cons of funeral trusts”.  The article opens with a reference to the IRS code section defining a qualified funeral trust and discusses the advantages of a trust for final expenses.  Noting the risks of the conventional preneed contract, the article recommends a do it yourself approach to setting up a funeral trust.  We have long been a proponent of the financial industry offering a trust based product for final expense purposes.  This would be a preneed alternative that many small death care operators would welcome.   What mom and pop funeral home wouldn’t like to avoid the hassle of filing annual reports and monitoring state law compliance?  A final expense trust product could also be attractive to churches and hospices.  But the Bankrate article fails to grasp certain complexities of the preneed transaction that doom the DIY funeral trust.

Costs are the first hurdle to establishing a DIY funeral trust.  As the Bankrate article suggests, we agree that an independent trustee is needed.  Back in 2013 we explored the costs of individual funeral trusts.  We found a few boutique trust companies that offered up such types of trusts, but all charged minimum set up fees and/or minimum annual fees.   While most financial planners have trust templates for standard estate planning purposes, the funeral trust is a different animal.  As the Bankrate article hints at, an individual may have to seek the assistance of an attorney.  That means the trust instrument may cost several hundred dollars.  Between the trustee and a drafting attorney, the DIY funeral trust could cost more than $500 to set up.

The Bankrate article glosses over the challenge of investing a small trust account.  We addressed this same issue when posting in response to a 2018 New York Times article about funeral planning.  Like so many funeral home preneed trusts, fees will eat up small investment funds.  To be economically viable, financial institutions must embrace the funeral trust concept and offer it as one of their products.  As with the funeral master trusts we have written numerous times, the independent funeral trust will need economies of scale and diversification.

While the Bankrate article gave lip service to IRC Section 685, the DIY funeral trust can never satisfy the qualified funeral trust requirements.  Section 685 provides the death care fiduciary substantial tax reporting advantages that are key to administrative efficiencies.  The following hyperlink displays some of our posts on Section 685.  The DIY funeral trust is in essence a grantor trust under the tax code.

The Bankrate article includes comments from a financial advisor who acknowledges her industry is not geared to providing final expense products.  She suggests that accordingly, financial planners tend to build funeral expenses in as part of the overall estate plan (rather than set up a specific trust).  We saw similar advice in article a few years ago and posted about frequent estate planning mistakes and the need for a final expense trust (When a Will will be too late.)

The DIY funeral trust may seem a safer alternative to the cons of the conventional preneed trust: the lack of portability, poor refund rights, and vulnerability to fraud.  An independent funeral trust program could provide individuals the means to preplan and prepay their funeral and burials without being obligated or committed to a particular funeral home or cemetery.  But such a program would have to provide consumers the documents, fiduciary and legal services and expertise to carry out their funeral and burial decisions. This is too much to ask of a DIY funeral trust.

Search the internet for “cemetery” and “friends of” and you will find a number of independent maintenance associations.  We’re not referring to Facebook groups that organize volunteer events for an abandoned cemetery, but rather we want to highlight those formal organizations established to provide continuing financial assistance to an active cemetery.

As a cemetery nears its capacity, revenues from lot sales and interment services will decline.  Most cemeteries are already experiencing revenue declines because of the public’s embrace of cremation.  Declining revenues require cuts to the cemetery’s maintenance budget.  This situation has led some of our cemetery clients to convert to tax exempt status so they may seek donations from prominent individuals with family buried in the cemetery.   However, caring families are frequently taking an independent route by forming their own maintenance association.

Established by descendants of cemetery lot owners, an independent maintenance association may have an agenda that differs from that of the cemetery board.  While the cemetery board may be focused on keeping the grass cut and the roads in repair, the independent maintenance association may want the chapel renovated, the mausoleum roof repaired or historic markers replaced.  Not wanting their donations diverted to general cemetery needs, the independent maintenance association retains control over its own budget or trust.  The association can also steer clear of trust distribution constraints that may be imposed by state law on the cemetery endowed care trust.

To achieve its own tax exempt status (so that donations are deductible), the independent maintenance association must qualify with the IRS as either a Section 501(c)(3) charity or a Section 501(c)(13) cemetery company.  Implicit in this approval is that association also be formed under state law as a company or association.   Costs will be incurred with both the formation of the company and the IRS filing.

The following hyperlink will take you to the Perservation and Enhancement Fund page of Mount Olivet Cemetery in Frederick, Maryland.  This page provides history of their ‘friends/preservation’ association and the challenges of preserving their garden cemetery.  The page provides a valuable marketing tool in seeking donations.

The independent maintenance association is not a friend that is available to the for-profit cemetery.  The tax exempt status precludes the association from providing maintenance assistance that is otherwise required from a for profit company.  For cemeteries with a mausoleum in need of repairs, we have seen the mausoleum being transferred to a new 501(c)(13) company.  Future crypt sales provide revenue for mausoleum repairs, and the independent maintenance association is then formed to help subsidize repairs and future upkeep.

A festering dispute between Missouri’s State Funeral Board and funeral directors association came to a head in a public conference call today.    The State Board scheduled the meeting in response to  its parent agency (the Division of Professional Registration) blocking the Board’s hiring of an investigator.  The Board held the meeting to discuss what actions should be taken to clarify its authority to hire and retain inspectors and investigators.  When the Board discussed the possibility of requesting an Attorney General opinion, the MFDEA raised the spectre of a 2015 Supreme Court decision and warned the Board to be careful about ‘what it asks for’.   The association went on to declare that it  had warned the Board against having inspectors taking pictures during funeral home inspections.

This dispute began in the fall of 2020 when Division of Professional Registration sought to require the State Board to use investigators from its central investigation unit.  The State Board acquiesced to that request but instructed those investigators to take pictures of inspection sites so that the Board and staff could instruct the investigators what to look for.  That practice led the association to make accusations of a ‘gottcha practice’ where funeral homes would be cited for infractions based on the photographs.   The Board and association went back and forth on whether funeral homes were actually complaining about the practice.  It was our understanding that no funeral home had actually been threatened with discipline for an infraction discovered through a photograph.

But, this controversy is a blunder of the Division’s making.  More than 40 years ago, the Missouri Attorney General’s office opined that the Division of Professional Registration does not have the authority to employ, or prohibit the employment of, investigators or inspectors of certain state boards.  (MO 55-80) That opinion involved a challenge from the Missouri Dental Board, which relies on the same enabling statute that authorizes the Missouri State Funeral Board’s  employment of investigators.  (Section 324.001.11(4))  Doesn’t the Division have a legal staff to vet these types of issues?  Granted, association members may have egged the Division on about gottcha practices, but ultimately, the State Board should have been given proper latitude to fulfill its responsibilities to the funeral consumers.  If the State Board wants to hire its own investigators, Missouri law gives that authority to the Board, not the Division.

Two consumer groups recently issued failing grades to funeral regulators from 33 states.  Taking the position that state funeral regulators have a duty to serve both professionals and consumers, The Funeral Consumer Alliance and the Consumer Federation of America worked together in evaluating each regulator’s website on the following criteria:

  1. The inclusion of a prominent link to consumer-focused information.
  2. An explanation of a consumer’s basic rights under the Federal Trade Commission’s “Funeral Rule.”
  3. An explanation of a consumer’s rights when buying a prepaid funeral.
  4. Other information about how consumers can optimize their purchase of funeral services, including links to the FTC website or publications on “Shopping for Funeral Services”.
  5. A prominent link for consumers wanting to file a complaint.
  6. The ability to see whether a funeral home has been subject to disciplinary action by the regulatory body.

In a report titled “An Evaluation of Consumer Information Provided by State Funeral Regulators”, these consumer groups found that most regulatory websites focus exclusively on educating funeral licensees.  The report includes recommendations to those state funeral regulators who need to do a better job educating the public.  These consumer groups also offer this brochure for funeral consumers.