In 1965 the Missouri Law regarding pre-need burial plans was revised to establish guidelines for the industry when creating pre-need funeral or burial contracts (RSMo 436.010-436.080).
The law established three types of funeral or burial contracts which may be sold, and sets forth certain conditions which must be met for each one to be a valid contract. The following is a brief statement of the major points to look for in determining which type of contract is being used.
- If the contract provides that all payments are to be deposited in a joint account under the joint names and joint control of the purchaser and seller, then the purchaser may request withdrawal of the funds held in the joint account at any time. When such request is made, the seller must cooperate in making the joint withdrawal, but the purchaser will receive only ninety percent (90%) of the amount paid in while the seller will retain the other ten percent (10%).
- If the contract allows the seller to deposit all payments received, over and above an amount equaling twenty percent (20%) of the total amount agreed to be paid, in an account in the name of the seller as trustee, then the purchaser may request cancellation of this contract prior to maturity but will receive only the amount she/he actually paid over and above twenty percent (20%) of the total amount for which the contract was written.
- If the contract allows the seller to retain as his/her own money all the funds collected until she/he has received twenty percent (20%) of the total amount agreed to be paid, then all additional payments must be deposited by the seller in the trust department of a state or national bank which has trust powers to be held for the use and benefits of the purchaser. This account must be carried in a trust fund in the name of the seller, but the bank becomes the trustee with power to invest the funds. The purchaser may request cancellation of this contract prior to maturity but will receive only the amount(s) she/he has actually paid over and above the twenty percent (20%) of the total for which the contract was written.
The contract may be paid in full, or the participant may be making payments on the contract. The participant’s equity under any of the three types of contracts noted above is the total of all payments made minus the amount to which the seller is entitled upon cancellation. Any interest earned by such deposited funds belongs to the seller.
- Example: A participant has been making payments on a pre-need burial contract with a face value of $1000. So far he has paid in $800. Depending on the type of contract that he has, he would receive 90% of the $800 that he has paid in, or 80% of the $800 that he has paid in. All interest earned would remain with the seller.
- Contract Option 1: $800 x 90% = $720 Cash Surrender Value available.
- Contract Option 2: $800 x 80% = $640 Cash Surrender Value available.
- Contract Option 3: $800 x 80% = $640 Cash Surrender Value available.
On August 13, 1982 Missouri Law was revised to allow for pre-need burial contracts to be made irrevocable. The option to make the contract irrevocable was made available to all pre-need burial contracts which were already in effect at the time. Please refer to MHABD Manual Section 1030.020.10 for more details.
For information regarding using life insurance to fund a pre-need burial contract please refer to MHABD Manual Section 1030.020.10.20 Assigning Life Insurance to Pre-Need Burial Contracts for more details.
On August 28, 2009 many important changes to the pre-need burial contract laws were put into effect. Please refer MHABD Manual Section 1030.020.10.15 Agreements On or After 28, 2009 for more details.