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2003 SESSION

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SB 1261 Preneed funeral contracts through irrevocable trusts.

Introduced by: Charles R. Hawkins | all patrons    ...    notes | add to my profiles | history

SUMMARY AS PASSED:

Preneed funeral contracts through irrevocable trusts. Clarifies that preneed funeral contracts executed through an irrevocable trust are not revocable and, therefore, qualify as a resource exclusion under Medicaid or other federal or state needs-based assistance programs. The bill creates an exception to the law that preneed funeral contracts shall be subject to termination if a person establishes an irrevocable burial trust, or an amount in an irrevocable trust that is specifically identified as available for burial expenses, where (i) a person irrevocably contracts for funeral goods and services, such person funds the contract by prepaying for the goods and service, and the funeral provider residing or doing business within the Commonwealth subsequently places the funds in a trust; or (ii) a person establishes an irrevocable trust naming the funeral provider as the beneficiary; however, such person shall have the right to change the beneficiary to another funeral provider. This bill is identical to HB 2418.

SUMMARY AS PASSED SENATE:

Preneed funeral contracts through irrevocable trusts. Clarifies that preneed funeral contracts executed through an irrevocable trust are not revocable and, therefore, qualify as a resource exclusion under Medicaid or other federal or state needs-based assistance programs. The bill creates an exception to the law that preneed funeral contracts shall be subject to termination if a person establishes an irrevocable burial trust, or an amount in an irrevocable trust that is specifically identified as available for burial expenses, where (1) a person irrevocably contracts for funeral goods and services, such person funds the contract by prepaying for the goods and service, and the funeral provider residing or doing business within the Commonwealth subsequently places the funds in a trust; or (2) a person establishes an irrevocable trust naming the funeral provider as the beneficiary; however, such person shall have the right to change the beneficiary to another funeral provider.

SUMMARY AS INTRODUCED:

A BILL to amend and reenact §§ 54.1-2820 and 54.1-2822 of the Code of Virginia, relating to preneed funeral contracts through irrevocable trusts.

Be it enacted by the General Assembly of Virginia:

1. That §§ 54.1-2820 and 54.1-2822 of the Code of Virginia are amended and reenacted as follows:

§ 54.1-2820. Requirements of preneed funeral contracts.

A. It shall be unlawful for any person residing or doing business within this Commonwealth, to make, either directly or indirectly by any means, a preneed funeral contract unless the contract:

1. Is made on forms prescribed by the Board and is written in clear, understandable language and printed in easy-to-read type, size and style;

2. Identifies the seller, seller's license number and contract buyer and the person for whom the contract is purchased if other than the contract buyer;

3. Contains a complete description of the supplies or services purchased;

4. Clearly discloses whether the price of the supplies and services purchased is guaranteed;

5. States if funds are required to be trusted pursuant to § 54.1-2822, the amount to be trusted, the name of the trustee, the disposition of the interest, the fees, expenses and taxes which may be deducted from the interest and a statement of the buyer's responsibility for taxes owed on the interest;

6. Contains the name, address and telephone number of the Board and lists the Board as the regulatory agency which handles consumer complaints;

7. Provides that any person who makes payment under the contract may terminate the agreement at any time prior to the furnishing of the services or supplies contracted for except as provided pursuant to subdivision 8; if the purchaser terminates the contract within thirty 30 days of execution, the purchaser shall be refunded all consideration paid or delivered, together with any interest or income accrued thereon; if the purchaser terminates the contract after thirty 30 days, the purchaser shall be refunded any amounts required to be deposited under § 54.1-2822, together with any interest or income accrued thereon; however, nothing herein shall prohibit the creation of an irrevocable inter vivos trust which may be established by any person residing or doing business within this Commonwealth for the purpose of paying the grantor's funeral and burial expenses;

8. Provides for an irrevocable burial trust, or an amount in an irrevocable trust that is specifically identified as available for burial expenses, where (i) a person irrevocably contracts with a provider of funeral goods and services for a funeral; and (ii) such person funds the contract by prepaying for the goods and services; and (iii) the funeral provider residing or doing business within this Commonwealth subsequently places the funds in a trust; or (iv) such person establishes an irrevocable trust naming the funeral provider as the beneficiary pursuant to § 54.1-2822.

9. Provides that if the particular supplies and services specified in the contract are unavailable at the time of delivery, the seller shall be required to furnish supplies and services similar in style and at least equal in quality of material and workmanship and the representative of the deceased shall have the right to choose the supplies or services to be substituted;

910. Discloses any penalties or restrictions, including but not limited to geographic restrictions or the inability of the provider to perform, on the delivery of merchandise, services or prearrangement guarantee; and

1011. Complies with all disclosure requirements imposed by the Board.

If the contract seller will not be furnishing the supplies and services to the purchaser, the contract seller must attach to the preneed funeral contract a copy of the seller's agreement with the provider.

B. If a life insurance or annuity contract is used to fund the preneed funeral contract, the life insurance or annuity contract shall provide either that the face value thereof shall be adjusted annually by a factor equal to the Consumer Price Index as published by the Office of Management and Budget of the United States, or a benefit payable at death under such contract that will equal or exceed the sum of all premiums paid for such contract plus interest or dividends, which for the first fifteen years shall be compounded annually at a rate of at least five percent. In any event, interest or dividends shall continue to be paid after fifteen years. In addition, the following must also be disclosed as prescribed by the Board:

1. The fact that a life insurance policy or annuity contract is involved or being used to fund the preneed contract;

2. The nature of the relationship among the soliciting agent, the provider of the supplies or services, the prearranger and the insurer;

3. The relationship of the life insurance policy or annuity contract to the funding of the preneed contract and the nature and existence of any guarantees relating to the preneed contract; and

4. The impact on the preneed contract of (i) any changes in the life insurance policy or annuity contract including but not limited to changes in the assignment, beneficiary designation or use of the proceeds, (ii) any penalties to be incurred by the policyholder as a result of failure to make premium payments, (iii) any penalties to be incurred or moneys to be received as a result of cancellation or surrender of the life insurance policy or annuity contract, and (iv) all relevant information concerning what occurs and whether any entitlements or obligations arise if there is a difference between the proceeds of the life insurance policy or annuity contract and the amount actually needed to fund the preneed contract.

C. When the consideration consists in whole or in part of any real estate, the contract shall be recorded as an attachment to the deed whereby such real estate is conveyed, and the deed shall be recorded in the clerk's office of the circuit court of the city or county in which the real estate being conveyed is located.

D. If any funeral supplies are sold and delivered prior to the death of the subject for whom they are provided, and the seller or any legal entity in which he or a member of his family has an interest thereafter stores these supplies, the risk of loss or damage shall be upon the seller during such period of storage.

§ 54.1-2822. Deposit of money received pursuant to preneed funeral contract.

Within thirty days following the receipt of any money paid pursuant to any preneed funeral contract or interest or income accrued thereon, unless such amounts are paid to fund either an annuity or an insurance policy which will be used to purchase the funeral supplies or services contracted for, the person receiving such amounts shall deposit all consideration paid pursuant to the terms of a preneed funeral contract in which the price of the supplies and services is not guaranteed, or ninety percent of all consideration paid pursuant to the terms of a preneed funeral contract in which the price of the supplies and services is guaranteed, in a special account in a bank or savings institution doing business in this Commonwealth.

The funds shall be deposited in separate, identifiable trust accounts setting forth the names of the depositor, the trustee for the person who is the subject of the contract, the name of the person who will render the funeral services and the name of the person who is the subject of the contract. The Except as provided in subdivision A 8 of § 54.1-2820, the purchaser shall have the right to change the beneficiary and trustee of the trust at any time prior to the furnishing of the services or supplies contracted for under the preneed funeral contract. Trust account records shall be subject to examination by the Board.

No funeral director, embalmer, funeral service licensee, owner of a funeral establishment, or any person employed by or having an interest in a funeral establishment shall serve as trustee of a trust account for which any such person, or any funeral establishment owned by or employing such person or in which such person has an interest, has been named the beneficiary or designated the provider of services, unless two or more such persons are named and serve as trustees and are required to act jointly in such fiduciary capacity.