Bill Text: MI SB1009 | 2013-2014 | 97th Legislature | Introduced

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Bill Title: Cemeteries and funerals; other; irrevocable endowment and perpetual care trust fund; allow individuals to serve as trustees. Amends sec. 16 of 1968 PA 251 (MCL 456.536).

Spectrum: Partisan Bill (Republican 1-0)

Status: (Introduced - Dead) 2014-07-16 - Referred To Committee On Regulatory Reform [SB1009 Detail]

Download: Michigan-2013-SB1009-Introduced.html

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SENATE BILL No. 1009

 

 

July 16, 2014, Introduced by Senator PAPPAGEORGE and referred to the Committee on Regulatory Reform.

 

 

 

     A bill to amend 1968 PA 251, entitled

 

"Cemetery regulation act,"

 

by amending section 16 (MCL 456.536), as amended by 2010 PA 326.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 16. (1) The commissioner shall require each cemetery to

 

establish and maintain an irrevocable endowment and perpetual care

 

trust fund. The amounts deposited into an endowment and perpetual

 

care trust fund pursuant to subsection (5) shall be held in

 

perpetuity by the trustee and may only be distributed to the

 

cemetery upon order of a court following petition by the

 

commissioner. Interest or income shall be used only for endowment

 

care. Except as otherwise provided in subsection (2), subsections

 

(2) and (3), money in the endowment and perpetual care trust fund

 

shall not be commingled with any other money or trust accounts. The

 

cemetery shall report annually before July 1 of each year, on forms

 

approved and furnished by the commissioner, endowment and perpetual

 

care trust fund information required to be reported to the

 

commissioner by other statutes and information regarding the funds

 

as the commissioner considers pertinent in the public interest. A

 

cemetery applying to the commissioner as authorized by other

 

statutes for an endowment and perpetual care trust fund deposit

 

modification or waiver shall be assessed the actual expenses for an

 

examination or investigation by the commissioner.

 

     (2) Notwithstanding subsection (1), bundling of funds held in

 

trust or escrow, for each cemetery or among cemeteries with common

 

ownership, is permissible, but only under all of the following

 

circumstances:

 

     (a) Each cemetery maintains separate trust and escrow account

 

records pursuant to statutory and rule requirements for endowed

 

care, merchandise, or prepaid funeral and cemetery sales.

 

     (b) A cemetery, or cemeteries with common ownership, has all

 

its trust or escrow accounts on deposit with 1 or more regulated

 

financial institutions with trust powers in this state.

 

     (c) The trustee, or the trustee's trading block nominee, holds

 

title in the name of each individual trust or escrow account for

 

that trust or escrow account assets and the assets are promptly

 

settled back to the individual accounts by the trustee in the

 

ordinary course of business.

 

     (3) Notwithstanding subsection (2), other comparable methods

 

of bundling or pooling of trust or escrow funds for investment

 

purposes may be are permissible upon terms and conditions approved

 

in writing by the commissioner and only after the commissioner is

 

reasonably satisfied that the title to, character of, and

 

accounting for funds held in trust or escrow is preserved.

 

     (4) Not later than January 1, 2010, the irrevocable endowment

 

and perpetual care trust fund shall be established, or

 

reestablished, with 1 or more regulated financial institutions with

 

trust powers that shall be the trustee of the portion of the fund

 

allocated to it. Not later than January 1, 2015, a new or existing

 

irrevocable endowment and perpetual care trust fund may be

 

established or reestablished with 2 or more individuals acting as

 

trustees of the portion of fund allocated to them. The individuals

 

acting as trustees may be officers or directors of the cemetery.

 

The cemetery shall enter into agreements of an irrevocable trust

 

agreements with each trustee. agreement with the trustee or

 

trustees of each portion of the fund. Those agreements shall

 

provide that the investing of the assets asset investments are

 

subject to the Michigan prudent investor rule as set forth in

 

sections 1501 to 1512 and 7803 of the estates and protected

 

individuals code, 1998 PA 386, MCL 700.1501 to 700.1512 and

 

700.7803, except that the agreement shall not be modified or

 

amended, as allowed under sections 1502(2) and 7105 of the estates

 

and protected individuals code, 1998 PA 386, MCL 700.1502 and

 

700.7105, to provide less than the standard of care in the prudent

 

investor rule. The cemetery shall notify the commissioner, in

 

writing, not later than 14 days before the effective date of an

 

appointment of a trustee. The cemetery may remove and replace a

 

trustee at any time, subject to the consent of the commissioner,

 

and subject to the terms of the cemetery's agreement with the

 

trustee. The fees and costs of the trustee may, in accordance with

 

the terms of the trust agreement, be paid from the principal of the

 

trust. A cemetery that establishes its irrevocable endowment and

 

perpetual care trust with 1 or more regulated financial

 

institutions with trust powers, and that does not reserve, retain,

 

or otherwise exercise any power of direction of specific

 

investments, is not liable for any deficiencies in the irrevocable

 

endowment and perpetual care trust caused by performance of the

 

investments. A cemetery may reserve the right to recommend, to a

 

trustee, an investment advisor , who is registered with the

 

securities and exchange commission under the investment advisers

 

act of 1940, 15 USC 80b-1 to 80b-21, or under the uniform

 

securities act (2002), 2008 PA 551, MCL 451.2101 to 451.2703, to

 

advise the trustee in the trustee's decisions on asset allocation,

 

investment managers, and investments. , except that a However, the

 

trustee is not required to heed such follow the advice of the

 

investment advisor. Alternatively, and notwithstanding any other

 

provisions of this section, and at all times subject to the

 

Michigan prudent investor rule, a cemetery may direct the trustees

 

to make certain investments, provided that the trust is a named

 

beneficiary of fiduciary liability insurance covering the

 

cemetery's or other fiduciaries' actions in an amount equal to 100%

 

of the amount so directed. Proof of the fiduciary liability

 

coverage shall be provided not less than annually to the

 

commissioner, in a form to be determined by the commissioner,

 

before any direction being given. The commissioner or the attorney

 

general may prosecute a claim against the fiduciary liability

 

insurance on behalf of the trust. The trustees are not liable, or

 

otherwise punishable, for complying with the direction of

 

investments except that the trustees shall retain custody of all

 

the investments.

 

     (5) Beginning January 12, 2009, an irrevocable endowment and

 

perpetual care trust fund shall be created by the deposit of at

 

least $50,000.00 into the fund before any sale of burial rights,

 

entombment rights, or columbarium rights is made.

 

     (6) Each month, not less than 15% of all proceeds received

 

during the previous month from the sales of burial rights,

 

entombment rights, or columbarium rights shall be deposited with

 

the trustee for inclusion in the endowment and perpetual care trust

 

fund. No The total deposit for a single burial right sale or

 

assignment shall not be less than $20.00. A cemetery may apply to

 

the commissioner for a modification of the minimum deposit

 

requirement. The commissioner shall take testimony and investigate

 

as he or she considers necessary and if the commissioner determines

 

that the applicant's endowment and perpetual care trust fund will

 

generate sufficient income to meet all current costs of keeping the

 

applicant's cemetery in good condition, the commissioner may modify

 

the minimum deposit requirement. A cemetery applying to the

 

commissioner for a modification of the endowment and perpetual care

 

trust fund deposit requirements shall be assessed the actual costs

 

for the commissioner's examination and investigation. Excess money

 

in the fund may be applied by a cemetery against future deposits

 

and shall be annually reported to the commissioner in a manner

 

prescribed by the commissioner.

 

     (7) The commissioner shall require each person engaged as

 

agent or seller in the selling of burial rights, entombment rights,

 

or columbarium rights owned by a party other than a cemetery or

 

corporation subject to the irrevocable endowment and perpetual care

 

trust fund requirements of this act and other laws , to deposit 15%

 

of all gross proceeds received from the sales of those rights into

 

the irrevocable endowment and perpetual care trust fund of the

 

cemetery in which the rights are located if an irrevocable

 

endowment and perpetual care trust fund exists for that cemetery. A

 

deposit required to be made by those persons shall be modified or

 

waived if the cemetery has received an irrevocable endowment and

 

perpetual care trust fund deposit modification or waiver approved

 

by the commissioner. The total deposit for a single adult burial

 

right sale or assignment shall not be less than $20.00.

 

     (8) Interest or income from the money in the endowment and

 

perpetual care trust fund shall be used exclusively for endowment

 

and perpetual care. No portion of the interest or income may be

 

used directly or indirectly for salaries or other payments to the

 

officers, directors, partners, members, or managers of the entity

 

owning the cemetery. Withdrawals of accumulated interest or income

 

from the endowment and perpetual care trust fund may be authorized

 

by the trustee, and such the withdrawals shall be documented in the

 

manner provided by rule of the commissioner. A cemetery shall

 

maintain records showing that interest from the endowment and

 

perpetual care trust fund is used exclusively for endowment and

 

perpetual care. The trustees are not responsible for ascertaining

 

that money paid to the cemetery is expended for the limited

 

purposes permitted by this subsection.

 

     (9) Subject to subsection (17), a cemetery that is required to

 

register pursuant to this act and an agent authorized by a cemetery

 

or acting on its behalf under an agreement or sales contract to

 

sell cemetery merchandise or cemetery services shall establish a

 

merchandise trust account and deposit a percentage of the gross

 

proceeds received from the sales as determined by the commissioner.

 

The merchandise trust account shall be maintained exclusively for

 

the deposit of the money into a regulated financial institution

 

under the terms of a written trust agreement approved by the

 

commissioner. All documents, reports, and records regarding the

 

trust shall be kept in this state. It shall be the responsibility

 

of each Each registrant under this act to assure shall ensure that

 

documents relating to the merchandise trust account are provided to

 

the commissioner upon request. If a subpoena is issued to obtain

 

these documents, the registrant shall pay all costs related to

 

obtaining the documents. The money Money shall be deposited in the

 

merchandise trust account not later than the month following its

 

receipt.

 

     (10) Subject to subsection (17), the total deposits to a

 

merchandise trust for the sale of cemetery burial vaults or other

 

outside containers, other than crypts installed underground and

 

sold as part of a cemetery lot, shall at all times be not less than

 

the greater of $100.00 per vault or outside container or 130% of

 

the total costs of the containers covered by the trust. Money

 

deposited in connection with a sale shall be repaid within 30 days

 

upon written demand of the purchaser. A burial vault shall be

 

installed only at need or by separate written authorization of the

 

purchaser. The cemetery shall have the right to withdraw the amount

 

on deposit for the delivered vault or outside container.

 

     (11) Subject to subsection (17), a contract or agreement made

 

with a purchaser of cemetery merchandise and cemetery services

 

shall contain a complete description of the cemetery merchandise

 

purchased and of the cemetery services to be rendered.

 

     (12) The commissioner shall require the cemetery owner or

 

operator to report annually before July 1 of each year on forms

 

provided by the commissioner. The reports shall contain information

 

as the commissioner considers necessary to ascertain that the

 

requirements of this act and rules promulgated under this act are

 

being implemented. Subject to approval of the department, the

 

cemetery owner or operator may ask for an extension not to exceed

 

90 days to submit the report required by this subsection. All

 

reports required by this subsection and subsection (13) shall

 

include a sworn statement by the cemetery owner or operator that

 

includes all of the following:

 

     (a) A certification that the signing cemetery owner or

 

operator has reviewed the report.

 

     (b) Based on the operator's or owner's knowledge, that the

 

report does not contain any untrue statement of material fact

 

related to the financial condition of the endowment and perpetual

 

care trust fund or merchandise trust accounts.

 

     (c) Based on the operator's or owner's knowledge, that the

 

report fairly presents all material information regarding the

 

financial condition of the endowment and perpetual care trust fund

 

or merchandise trust accounts.

 

     (d) That the signing operators or owners are responsible for

 

establishing and maintaining internal controls; have designed those

 

internal controls to ensure the accuracy of material information

 

relating to the condition of the endowment and perpetual care trust

 

fund or merchandise trust accounts; have evaluated the

 

effectiveness of the internal controls within 90 days before the

 

issuance of the report; and have included information evaluating

 

the effectiveness of those internal controls.

 

     (13) At a minimum, the commissioner shall require the

 

following information concerning the endowment and perpetual care

 

trust fund, the accuracy of which shall be certified by a certified

 

public accountant:

 

     (a) Beginning and ending balances.

 

     (b) Receipts from the sale of burial, entombment, and

 

columbarium rights.

 

     (c) Deposits to the endowment and perpetual care trust fund.

 

     (d) Itemized payments of interest or income.

 

     (e) Documentation that interest was utilized solely for

 

endowment care.

 

     (14) If, after an audit by the commissioner's staff, a deficit

 

in the amount of required deposits to the a trust funds fund is

 

found, the commissioner may assess a penalty in the amount allowed

 

under this act. The cemetery entity may request an administrative

 

hearing before the commissioner or a hearing officer designated by

 

the commissioner within 30 days after being notified of a deficit

 

by the commissioner. If, following the administrative hearing, the

 

commissioner determines that a deficit does exist, an additional

 

penalty may be assessed each month on the unpaid monthly balance

 

until the deficit is paid in full.

 

     (15) In addition to all other remedies at law or in equity,

 

the attorney general and the circuit court of the county in which

 

the cemetery is located have all the powers and jurisdiction

 

granted to the attorney general and court as to trusts covered by

 

1915 PA 280, MCL 554.351 to 554.353. The remedies granted include

 

all endowment and perpetual care trust funds without regard to

 

uncertainty or indefiniteness of beneficiaries.

 

     (16) All fees, charges, and penalties, or other money from any

 

source, collected under this act, other than fines prescribed in

 

section 21, shall be paid to the commissioner. Upon receipt, the

 

commissioner shall remit money received to the department of

 

treasury for deposit in the general fund of this state.

 

     (17) Any preneed contracts for cemetery merchandise or

 

services entered into on or after January 1, 2005 are subject to

 

the prepaid funeral and cemetery sales act, 1986 PA 255, MCL

 

328.211 to 328.235.

 

     (18) Not less than 7 days before 30% of the endowment and

 

perpetual care or perpetual care funds established under this act

 

are moved from an account or otherwise engaged in some type of

 

financial transaction or investment, the cemetery owner or operator

 

shall notify the commissioner of the transaction on appropriate

 

forms that the commissioner shall authorize. The commissioner may

 

allow the submission of a notification up to 7 days after the

 

transaction, for good cause shown. Failure to comply with this

 

subsection is considered a violation of this act.

 

     (19) The commissioner, upon finding after notice and an

 

opportunity for a hearing pursuant to the administrative procedures

 

act of 1969, 1969 PA 306, MCL 24.201 to 24.328, that a cemetery

 

owner or operator has failed to timely submit a report required

 

under subsections (12) and (13), regardless of whether he or she

 

acted alone or through an employee or agent, may impose an

 

administrative fine, payable to the commissioner, for the

 

enforcement of this act. If the commissioner finds that a violation

 

occurred despite the exercise of due care, the commissioner may

 

issue a warning instead of imposing an administrative fine.

 

     (20) The commissioner shall advise the attorney general of the

 

failure of a person to pay an administrative fine imposed under

 

this section. The attorney general may bring an action in a court

 

of competent jurisdiction for the failure to pay an administrative

 

fine imposed under this section.

 

     (21) Applicable provisions of the revised judicature act of

 

1961, 1961 PA 236, MCL 600.101 to 600.9947, apply to civil actions

 

filed pursuant to this section.