Preneed Trusts

Few cemeteries offer preneed because of the complexity of accounting for a sale that can include an interment right, a memorialization product and products/services that cannot be delivered until the time of need.  Interment right sales represent an immediate cash flow to the cemetery because delivery can be made at any time the conditions of the contract are fulfilled.  Memorialization products can be delivered immediately, but most often delivery is deferred (which typically triggers trusting requirements).   Some products/services (such as an opening/closing) cannot be delivered until the time of death.  Consequently, accounting for cemetery preneed is more complicated than that required for a preneed funeral sale.  But, cremation and a difficult economic environment are forcing cemeteries to offer preneed.  Accordingly, our contract forms and administration allow the cemetery operator to offer guaranteed, non-guaranteed, or a combination of such arrangements.

We establish and maintain an individual database account for each preneed contract to report the following items:

• sales prices
• payments and trust deposit balances (per subcategory)
• disbursements made due to the cancellation or performance of a preneed contract
• retainage (sales expense or origination fees)
• market value
• balance due on the contract
• expenses (trustee fees, investment advisor fees, administration fees)
• income (by character)
• last payment date
• finance or installment charges
• aging data on installment accounts

Our preneed trust administration includes all regulatory reports required from the preneed trustee.  We also prepare for the trustee the Federal form 1041QFT (which eliminates the need for income reporting to preneed purchasers).

As revenues decline because of cremation and the economy, cemeteries have become more dependent upon their maintenance care trust. This dependence comes at a difficult time for trusts that primarily hold fixed income investments. Cemetery regulators are expanding their oversight of these trusts, and requiring more reporting and audits. To meet this increased oversight, we provide administration to track interment sales and instruct the cemetery when maintenance deposits are required. We also instruct the maintenance care trustee regarding the definition of distributable income and when income distributions can be made. We also prepare the necessary state regulatory reports and the trustee’s tax return. We also consult with the trustee regarding permissible investments.