funeral homes

A disclosure before going any further - my father is a funeral director. All this means is that I have seen both sides of the pre-need funeral trust issue. My father drummed into me one good, practical use for this kind of trust: it removes the burden from the survivors in selecting the funeral.

What I have learned about funeral trusts since beginning my practice in 1987 is that people think they can put their funeral arrangements in their Wills. No can do. Funeral trusts create the means for people to set out and control their funerals.

In my opinion, estate planning ought to include pre-need funeral trusts. Pre-need funeral trusts provide a valid deduction for Medicare purpose. So for that reasons as well as those I have already given are why I think pre-need funeral trusts need to be included into any estate planning.

Indiana has three statutes relating to funeral trusts: Prepaid Funeral Plans and Funeral Trust Funds Established Before 1982 (IC 30-2-9), Funeral Trust Funds, Payment of Funeral (IC 30-2-10), and Burial Services, or Merchandise in Advance of Need (IC 30-2-13). I will be discussing all of them in other posts.

Two.

I categorize the first as a consumer oriented blog: R.Brian Burkhardt "YourFuneralGuy & Author "Rest in Peace--Insider's Tips toThe Low Cost Less Stress Funeral"'s Amazon Blog.

The second comes from a lawyer, Death Care Compliance Law. I really like this one - it has a national viewpoint and the writer seems more familiar with funeral homes than most lawyers.

Combining estate planning and funerals homes is rather common in my practice. Combining those subjects with cars is uncommon. If you listen to National Public Radio, then you are probably aware of the show "Car Talk." No other show mines the humor in car repair and maintenance as does "Car Talk". I never thought the show would be the subject of a blog post, especially one related to estate planning. Actually, the show was the subject of posts on two different blogs and this is the third. The following is from Charles R. Goerth's blog:

Disposal of remains is not a laughing matter, but laughter can be excused if the remains are one’s own, I guess.

That’s what I concluded upon reading the posting today on Neil E. Hendershot’s Estate Planning Blog relating the Car Talk exchange between Click and Clack regarding use of an automobile to dispose of one’s cremains. (Cremains is the current descriptor in some quarters for cremation.)

Yes, that kind of topic does raise an eyebrow or maybe both. Both previous writers handle the issue quite well, but I came to a stop at this point:

Thinking about what to do with cremains is a question which comes up regularly in estate planning consultation. But first, recognize that this direction for disposition of remains shouldn’t appear in a Will. It should go into a Health Care Power of Attorney.

Mr. Goerth does not explain that a Will does not get probated until after the funeral. As in Pennsylvania, Indiana law gives the person designated to have the power of attorney (they are called an attorney-in-fact) under a Health Care Power of Attorney the power to decide on the principal's (that is the person creating a Power of Attorney) funeral arrangements. However, Indiana law also provides another method for the setting up of funeral arrangements prior to death. This other method is a pre-need funeral trust.

I always mention a pre-need funeral trust to my estate planning clients. The funeral homes do the paperwork for this kind of trust. The client would go to the funeral home of their choice, make their funeral arrangements (and I am including cremation when I use "funeral" here), and an insurance policy is bought to fund the trust. Nothing further needs done by anyone - client, family, or attorney-in-fact - when time comes to make any funeral arrangements. The client receives the funeral that the client wants without imposing upon the attorney-in-fact the hard choice of making funeral arrangements.

While the State of Indiana goes after Robert Nelms for possible fraud regarding cemetery funds (see my post here, here and here), The Indianapolis Business Journal reports others sued the financial services firms, Memory Gardens lawsuit seeks $20M:

Indiana law declares how one inherits a funeral plot.

Generally, the buyer owns what they purchase ("...the burial rights in a lot, plot, burial space, crypt, or niche...") with two exceptions. First, the buyer has "more than one (1) interment, entombment, or inurnment space" and has have a spouse at the time of purchase. See IC 23-14-39-2 and IC 23-14-39-3. The spouse loses this right upon divorce unless the decree of dissolution provides otherwise. In twenty years of practicing law, funeral plots never figured into any of my divorces.

Where more than one person purchases burial rights together, the law presumes they have a joint tenancy (a tenancy by the entirety for married persons)with rights of survivorship. Note this: the law does not change if the person purchasing the burial rights are of the same sex. By creating a joint tenancy with right of survivorship, these burial rights pass to the survivor without need of probate. See IC 23-14-40.

If the owner has no wife or joint tenant, the owner can pass through the owner's probate estate (whether dying with or without a Will). The statute has several exceptions making quotation of the statute easier than paraphrasing:

IC 23-14-42-4 Upon the death of the record owner of the burial rights in a burial plot, the burial rights pass as part of the estate of the owner if:
(1) the record owner did not dispose of the burial rights by:

(A) a specific devise in the last will and testament of the record owner; or
(B) a written designation or transfer of ownership recorded with the cemetery under section 2 or 3 of this chapter;

(2) the burial rights have not become vested in another individual under IC 23-14-39 or IC 23-14-40;
(3) the burial plot does not become a family burial plot under IC 23-14-41 before the instrument referred to in subdivision (4) is recorded with the cemetery; and
(4) an instrument that:

(A) is prepared in accordance with IC 29-1; and
(B) documents the person or persons entitled to become the new record owner or owners of the burial plot and to receive the burial rights as part of the deceased record owner's estate;
is recorded with the cemetery.

Bottom line: another person can inherit burial rights either as joint tenant or through a probate transfer.

The Indianapolis Star reports, Temporary receiver named for Nelms properties, about the Johnson County court appointing a temporary receiver in the Nelms case.

Johnson County Circuit Court Judge Mark Loyd selected attorney Lynette Gray as a temporary receiver over Memory Gardens Management Corp., which includes Forest Lawn Memory Gardens in Greenwood and other cemeteries in Michigan and Ohio.

Robert E. Nelms, 39, and Debora Johnson, 48, were charged in Marion County Jan. 17 with nine felony counts each. The counts include theft and violations of a cemetery perpetual-care fund.

Cemetery ownership found themselves in the news this past week with headlines like Cemetery owners charged with fraud. What happened?

Robert Nelms, 39, and Debora Johnson-Nelms, 48, face multiple counts of theft, fraudulent or deceitful acts, violations of a cemetery perpetual care fund and using a perpetual care fund for prohibited loans. Nelms is president and chief executive officer of Memory Gardens Management Corp., which has Indiana locations in South Bend, Fort Wayne and Greenwood, where it owns Forest Lawn Memory Gardens.

In December 2004, according to court documents filed today in Marion Superior Court, the couple agreed to purchase the company for $27 million from owner Fred Meyer of Indianapolis. The Nelmses, who already had operated funeral homes in New Jersey and New York, arranged a bridge loan for the $13.5 million down payment, a probable cause affidavit says.

After the purchase, the loan was repaid using money from the company's trust fund, the affidavit says, even though that fund must be used to care for grave sites and cemetery grounds. That trust fund was transferred to a new bank, and all of the money in the account was withdrawn by April 2005, the affidavit says.

So far I have seen only one news story pointing out that these are cemetery funds and not pre-paid funeral trust funds. That story, Pirkle: Management problems don’t apply to local funeral home, came out of Washington, Indiana:

Since I advocated pre-paid funeral trusts as part of estate planning, emphasizing the difference between funeral trusts and perpetual cemetery funds is important for the public.

Indiana law describes with specificity how the cemetery is to set up and run a perpetual care fund.

That specific criminal penalties apply to misusing perpetual care funds does not clearly appear in the newspaper stories. The Indianapolis Star buried this paragraph towards the end of today's Cemetery case could spur other charges:

That statute reads as follows:

Indiana does not list all its crimes in its criminal code and this serves as a reminder that bad business behavior may have criminal consequences.

Estate planning includes funerals? Yes. Medicare exempts pre-paid funeral plans from the money the federal government can grab. If nothing else that ought to make them attractive to the public.

Can I just put all that in a Will? No. The Will sees probate after the death and not before.

Does a lawyer set up a funeral trust? No, you can do that through a funeral director. See FUNERAL PLANNING on the Indiana Funeral Director Association's website.

Reading Funeral costs can be headache for families unprepared in the Muncie Star-Press brought all this to mind.

The Star-Press article includes information on pre-need planning. The article nails the most important non-financial reason for pre-planning a funeral:

(The article also mentions that Indiana's township trustees provide money for funerals of low income people.)

Indiana law has two kinds of pre-paid funeral trusts. One funded by cash and the other by an insurance policy. I have an article dealing more specifically with the law here. I think (but have no evidence to back me up here) most people are using insurance policies to fund the funeral trust. For an example of a pre-arrangement program see MASTERCHOICE® FUNERAL TRUST.

Setting up a pre-paid funeral trust means going to the funeral home and selecting the sort of funeral you want. Before going to the funeral home, you should read the Federal Trade Commission's Funerals: A Consumer Guide. The FTC's Funeral Home Rule requires a funeral home to display a price list that includes all goods and services the funeral home will provide to the buyer. The funeral trust funds whatever the buyer selects.

I know no one likes to consider Wills and estate planning or funerals, but not doing can leave your survivors making the choices and may leave them in the same position as the Randolph family.