Tennessee § 62-5-407 - Pre-need funeral contracts funded by trusts.

§ 62-5-407. Pre-need funeral contracts funded by trusts.

Every pre-need seller engaged in the business of selling pre-need funeral contracts funded by a trust shall establish a pre-need funeral trust fund. The trust fund shall be established by executing a written trust agreement with a trustee; provided, that a pre-need seller may change the trustee of its trust fund by providing written notice to the commissioner no later than thirty (30) days prior to the change, along with evidence sufficient to the commissioner that the trustee will be able to comply with the requirements of this part. If the commissioner determines that the evidence submitted is insufficient to ensure that the trustee will be able to comply with the requirements of this part, the commissioner may refuse to allow the pre-need seller to change the trustee. If the commissioner does not object to the change of trustee within sixty (60) calendar days of receiving a request, the current trustee shall have not less than ninety (90) calendar days from the date it receives notice of the proposed change to transfer all trust assets related to the pre-need funeral contracts issued by the pre-need seller held by the trustee to the successor trustee. As used in this section, “trustee” means a savings and loan association, bank, savings bank, credit union, or trust company organized under the laws of any state or organized under the laws of the United States. If the pre-need funeral contract purchaser chooses to fund the pre-need funeral contract by a trust deposit or deposits, the pre-need seller shall deposit all funds with the trustee, to be held in trust, within fifteen (15) calendar days of receipt. The pre-need seller, at the time of making the deposit, shall furnish to the trustee the name of each pre-need funeral contract beneficiary and the amount of payment on each for which the deposit is being made. The trustee may establish: A separate trust fund for each pre-need funeral contract; A single trust fund for all pre-need funeral contracts issued by a pre-need seller; or A single trust fund for all pre-need funeral contracts issued by multiple pre-need sellers. For trusts established pursuant to subdivisions (b)(2)(A) and (b)(2)(B), the trust accounts must be carried in the name of the pre-need seller and the pre-need seller must be based in this state. A trustee managing a trust established pursuant to this section shall manage the trust in accordance with the Tennessee Uniform Prudent Investor Act of 2002, compiled in title 35, chapter 14. However, § 35-14-103(b) does not apply to trusts, or trustees managing a trust, established pursuant to this section. Accounting records for trusts established pursuant to this section must be established and maintained for each individual pre-need funeral contract beneficiary showing the amounts deposited and invested, and interest, dividends, increases, and accretions earned. A trustee managing a trust established pursuant to this section shall: Provide a semiannual financial report concerning the trust to the department in a manner determined appropriate by the department by rule; and Make accounting records for the trust available to the comptroller of the treasury and the department, upon request, for review and audit. If the trustee uses a board for the management of the trust established pursuant to this section, then the trustee shall maintain insurance on behalf of each board member against liability asserted against or incurred by the board member in that capacity. Funds deposited in trust under a pre-need funeral contract may, with the written permission of the pre-need funeral contract purchaser and written approval of the commissioner, be withdrawn by the trustee and used to purchase a prearrangement insurance policy. The trustee shall disclose, in writing, the terms of the prearrangement insurance policy to the pre-need funeral contract purchaser. Except as provided in this subsection (c), no funds deposited in trust with a trustee pursuant to this section shall be withdrawn by the trustee to purchase a prearrangement insurance policy. No pre-need seller, affiliate of a pre-need seller, or any person directly or indirectly engaged in the burial, funeral home, or cemetery business may act as trustee for any pre-need funeral trust. No pre-need seller, affiliate of a pre-need seller, or any person directly or indirectly engaged in the burial, funeral home, or cemetery business may share in the responsibilities of or direct the actions of the trustee of a pre-need funeral trust fund. It is unlawful to loan pre-need funeral trust funds to a pre-need seller, an affiliate of a pre-need seller, or any person directly or indirectly engaged in the burial, funeral home, or cemetery business. Furthermore, the pre-need seller's interest in the trust shall not be pledged as collateral for any loans, debts, or liabilities of the pre-need seller and shall not be transferred to any person without the prior written approval from the commissioner and the trustee. Acts 2007, ch. 592, § 8; 2016, ch. 911, § 7; 2019, ch. 247, §§ 1-3. Compiler's Notes. Former part 4, §§ 62-5-401 — 62-5-409 (Acts 1963, ch. 316, §§ 1-8; 1965, ch. 185, § 1; impl. am. Acts 1971, ch. 137, §§ 1, 2; 1972, ch. 553, § 5; 1981, ch. 121, §§ 1-10; 1981, ch. 416, § 5; T.C.A., §§ 62-528 — 62-535; Acts 1985, ch. 230, §§ 1-9; 1985, ch. 231, § 1, 1986, ch. 825, § 1; 1986, ch. 925, §§ 1, 2; Acts 1989, ch. 591, § 113; 1992, ch. 922, §§ 8-10; 1996, ch. 958, § 2, 1997, ch. 400, §§ 1, 2), concerning contracts for future services, was repealed by Acts 2007, ch. 297, § 1, effective January 1, 2008. Amendments. The 2019 amendment, in (a), deleted “as defined in § 62-5-403 ” preceding the proviso in the first sentence, inserted “related to the pre-need funeral contracts issued by the pre-need seller” in the third sentence, and added the last sentence; and rewrote (b) which read: “(b) If the pre-need funeral contract purchaser chooses to fund the pre-need funeral contract by a trust deposit or deposits, the pre-need seller shall deposit all funds with the trustee, to be held in trust, by the twentieth day of the month following the month of receipt. Upon finding that a pre-need seller has failed to appropriately and timely deposit into any trust, the commissioner may, in addition to or in lieu of any other disciplinary action, require that deposits be made within a shorter time frame, after receipt of the funds, for a period not more than two (2) years after the finding of a violation. The pre-need seller, at the time of making the deposit, shall furnish to the trustee the name of each pre-need funeral contract beneficiary and the amount of payment on each for which the deposit is being made. The trustee may establish a separate trust fund for each pre-need funeral contract or a single trust fund for all pre-need funeral contracts issued by a pre-need seller. The trust accounts shall be carried in the name of the pre-need seller, but accounting records shall be established and maintained for each individual pre-need funeral contract beneficiary showing the amounts deposited and invested, and interest, dividends, increases, and accretions earned.” Effective Dates. Acts 2019, ch. 247, § 4. July 1, 2019; provided that, for purposes of promulgating rules, the act took effect May 2, 2019. Cross-References. Cemeteries, title 46. Fraud as to pre-need sales contracts, § 46-1-308 . Law Reviews. Preneed Funeral Contracts in Tennessee, 11 Mem. St. U.L. Rev. 231. Attorney General Opinions. Contracts for the sale of burial vaults, OAG 96-017, 1996 Tenn. AG LEXIS 20 (2/15/96). Sellers of pre-need funeral contracts, which are funded by a trust or trusts established by the seller, may not combine their individual pre-need trusts with other Tennessee sellers of pre-need funeral contracts to create a single statewide funeral trust. OAG 13-42, 2013 Tenn. AG LEXIS 44 (6/4/13).