Preneed: A Pandora's Box of Problems
PNC Bank has been hit with $15 million of punitive damages because Allegiant Bank did not know its client.
Before opening a fiduciary account, banks are required to perform due diligence on the trust’s grantor and on the trust’s purposes. Such due diligence is referred to as ‘know your client’ or “KYC”. KYC requirements had…
We continue our discussion of the composite Federal Form 1041QFT with a post about the individual account statement.
With the composite return, income and expenses are allocated to the individual preneed account and taxes are computed at that level rather than at the trust level. To allow the IRS to test the composite tax liabilities,…
A 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…
For an industry that has been dependent on interest income, the past 9 years have been tough on the death care industry. Interest rates started to decline 9 years ago, with the bottom hitting in 2008. Zero interest rates forced death care fiduciaries to diversify into equity investments, but trusts have experienced a sideways market…
The Illinois Department of Revenue made a revision to Schedule M of the 2014 IL-1041 form that may go unnoticed by many trust tax preparers. The change is meant to clarify that preneed accounts established pursuant to the Illinois Funeral or Burial Funds Act may take an adjustment that will eliminate the preneed trust’s state…
For 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…
The Memorial Business Journal’s July 10th story on the NFDA 2014 consumer survey included a commentator’s suggestion that preneed funding has declined because so few options are offered the consumer. The story’s commentators interpreted the decline in preneed funding as reflecting fewer consumers being motivated by price guarantees, and those that might be, need…
Tax day is only a week away, and preneed trust returns will look a little different this year. As we reported back in December, the IRS took the position that preneed trusts are subject to the Medicare Tax used to fund the Affordable Health Care Act. Accordingly, Federal Form 1041QFT now requires the reporting of…
Legislation was introduced this week in the Kansas Legislature, and one of the bill’s changes seeks to clarify how cemetery care fund requirements can be computed. We have found this a source of confusion for cemeteries and regulators in many states. Depending upon the type of interment right purchased, the care fund requirement is often…
The International Cemetery, Cremation and Funeral Association (ICCFA) made an old but persuasive argument to get the IRS to exempt cemetery care trusts from the Medicare tax that will fund ObamaCare. As discussed in a prior post, the IRS had initially proposed to apply the tax to both cemetery care trusts and preneed trusts. With …