Bill 414

                    Current Status

Bill Number:               414
Ratification Number:       143
Act Number                 89
Introducing Body:          Senate
Subject:                   Preneed funeral contracts

(A89, R143, S414)

AN ACT TO AMEND CHAPTER 7 OF TITLE 32, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO PRENEED BURIAL CONTRACTS, SO AS TO CHANGE THE NAME OF THE CONTRACTS AUTHORIZED UNDER THE CHAPTER TO PRENEED FUNERAL CONTRACTS, TO DEFINE THE TERMS "SELLER", "PROVIDER", "PURCHASER", AND "BENEFICIARY", TO REQUIRE THAT WHEN ANY VAULT IS SOLD PRENEED BY A SELLER IN ACCORDANCE WITH THIS CHAPTER, ONE HUNDRED PERCENT OF ACTUAL COST TO THE SELLER AT THE TIME OF PAYMENT MUST BE HELD AS TRUST FUNDS AND DEPOSITED IN A FINANCIAL INSTITUTION, TO REQUIRE THAT ALL TAXES ON THE TRUST ACCOUNT MUST BE PAID IN ACCORDANCE WITH THE INTERNAL REVENUE CODE AND APPLICABLE RULES AND REGULATIONS, TO PROVIDE FOR A FUNERAL CONTRACT WHEN THE FULL CONTRACT PRICE AMOUNT IS PAID TO THE PROVIDER, TO REQUIRE THAT THE FUNDS HELD BY A FINANCIAL INSTITUTION IN TRUST FOR A BENEFICIARY MUST NOT BE PAID UNTIL A DEATH CERTIFICATE IS FURNISHED BY THE PROVIDER, TO PROVIDE FOR THE REFUND OF AMOUNTS DEPOSITED WITH THE PROVIDER WHEN THEY DO NOT CONSTITUTE PAYMENT IN FULL, TO PROVIDE THAT ALL CONTRACTS CONTAIN THE NAME AND FUNERAL SERVICE LICENSE NUMBER OF THE PROVIDER AND SELLER, TO PROVIDE FOR A PROCEDURE FOR ESTABLISHING A TRUST FOR THE PURCHASER OF A CONTRACT AND ESTABLISH REQUIREMENTS WITH REGARD TO THE ESTABLISHMENT AND MAINTENANCE OF A TRUST ACCOUNT, TO PROVIDE THAT THE CONTRACT IS VOIDABLE IF THE PURCHASER FAILS TO MAKE PAYMENTS AS PROVIDED IN THE CONTRACT, TO PROVIDE THAT IF THE MERCHANDISE SELECTED IS NOT AVAILABLE AT THE TIME OF NEED THAT THE PROVIDER MUST MAKE AVAILABLE TO THE PURCHASER MERCHANDISE OF EQUAL OR GREATER VALUE WHICH MUST BE APPROVED BY THE PURCHASER OR HIS REPRESENTATIVE, TO PROVIDE UNDER WHAT CONDITIONS CONTRACTS MAY BE MADE IRREVOCABLE, TO PROVIDE FOR A PROCEDURE FOR THE REFUND OF MONIES PAID FOR A CONTRACT, TO PROVIDE A PROCEDURE FOR THE TRANSFER TO ANOTHER PROVIDER OF A CONTRACT, TO DELETE PROVISIONS WITH REGARD TO THE MANNER IN WHICH TRUST FUNDS MUST BE ESTABLISHED AND MAINTAINED, TO PROVIDE FOR THE OCCURRENCE OF A PROVIDER GOING OUT OF BUSINESS, TO AUTHORIZE THE BOARD OF FINANCIAL INSTITUTIONS TO ESTABLISH AN AMOUNT RATHER THAN A TWO DOLLAR SERVICE CHARGE TO BE COLLECTED FROM EACH PURCHASER TO BE USED IN ADMINISTERING THE PROVISIONS OF THIS CHAPTER, TO DELETE PROVISIONS MAKING IT UNLAWFUL FOR ANY PERSON OTHER THAN A FUNERAL DIRECTOR OR HOME TO FURNISH OR PERFORM FUNERAL SERVICES TO ACCEPT OR HOLD PAYMENTS ON A PRENEED BURIAL CONTRACT EXCEPT FINANCIAL INSTITUTIONS, TO DELETE PROVISIONS RELATING TO COMMISSIONS ALLOWED PERSONS ON TRUST FUNDS WHICH ARISE OUT OF A PRENEED BURIAL CONTRACT, TO DELETE PROVISIONS WHICH MAKE IT UNLAWFUL FOR A LICENSEE WHO SELLS PRENEED BURIAL CONTRACTS TO SOLICIT OR PUBLICLY ADVERTISE THE AVAILABILITY OF THEM AND TO ESTABLISH A PROCEDURE FOR THE SOLICITATION AND ADVERTISING OF PRENEED FUNERAL CONTRACTS, AND TO PROVIDE FOR THE PROHIBITION ON THE SOLICITATION OF THESE CONTRACTS, AND TO AMEND SECTION 39-55-35, RELATING TO DEFINITIONS USED IN THE SOUTH CAROLINA CEMETERY ACT OF 1984, SO AS TO REDEFINE "MERCHANDISE."

Be it enacted by the General Assembly of the State of South Carolina:

Preneed funeral contracts

SECTION 1. Chapter 7, Title 32 of the 1976 Code is amended to read:

"CHAPTER 7

Preneed Funeral Contracts

Section 32-7-10. As used in this chapter, unless the context requires otherwise:

(1) 'Board' means the State Board of Financial Institutions;

(2) 'Financial institution' means a bank, trust company, or savings and loan association authorized by law to do business in this State;

(3) 'Preneed funeral contract' means a contract, which has for its purpose the furnishing or performance of funeral services, or the furnishing or delivery of personal property, merchandise, services of any nature in connection with the final disposition of a dead human body, to be furnished or delivered at a time determinable by the death of the person whose body is to be disposed of, but does not mean the furnishing of a cemetery lot, crypt, niche, mausoleum, grave marker or monument;

(4) 'Seller' means a licensed funeral director in this State who is directly employed by the provider;

(5) 'Provider' means a funeral home licensed in this State which is the entity providing services and merchandise pursuant to item (3) and is designated trustee of all funds;

(6) 'Purchaser' means the person who is obligated to make payments under a preneed contract;

(7) 'Beneficiary' means the person who is to be the subject of the disposition, services, facilities, or merchandise described in a Preneed Contract subject to item (3).

Section 32-7-20. (A) (1) All payments of money made to any person upon any agreement or contract or any series or combination of agreements or contracts, but not including the furnishing of cemetery lots, crypts, niches, mausoleums, grave markers or monuments, which has for a purpose the furnishing or performance of funeral services, or the furnishing or delivery of personal property, merchandise, or services of any nature in connection with the final disposition of a dead human body, to be furnished or delivered at a time determinable by the death of the person whose body is to be disposed of, are held to be trust funds.(2) When any vault is sold preneed by a seller in accordance with this chapter, one hundred percent of actual cost to the seller at the time of payment must be held as trust funds and deposited in a financial institution. (3) The provider receiving the payments is declared to be a trustee of it, and shall deposit all payments in a financial institution. All of the interest, dividends, increases, or accretions of whatever nature earned by the funds deposited in a trust account must remain with the principal of the account and become a part of it, subject to all of the regulations concerning the principal of the fund contained in this section. After the death of the beneficiary, the principal and all accrued earnings must be applied to the cost in effect at the time of death of the services and merchandise specified in the contract. Any shortfall in the funds must be paid by the next of kin or the estate of the beneficiary and any excess must be refunded to the estate of the beneficiary. All taxes on the fund must be paid in accordance with the Internal Revenue Code and applicable rules and regulations.

(B) The provider may enter into a contract and guarantee to provide services and merchandise as provided for in Section 32-7-10(3) in the future at no additional cost to the purchaser when the full contract price amount is paid to the provider. After the death of the beneficiary of a guaranteed-price contract, the principal and all accrued earnings must be paid to the provider to cover the costs in effect at the time of death of the services and merchandise specified in the contract.

(C) All payments made under the agreement, contract, or plan are and remain trust funds with the financial institution until the death of the beneficiary and until the delivery of all merchandise and full performance of all services called for by the agreement, contract, or plan, except where payment is made pursuant to Section 32-7-30.

(D) The funds may not be paid by the financial institution until a certified death certificate and a certified statement is furnished by the provider to the financial institution setting forth that all of the terms and conditions of the agreement have been fully performed. The provider has no obligation to deliver any merchandise or perform any services for which payment in full has not been deposited in the financial institution. Any amounts deposited which do not constitute payment in full may be credited against the cost of merchandise or services contracted for by representatives of the deceased. Any balance remaining in the fund after the payment for the merchandise and services as set forth in the agreement, contract, or plan must be paid to the estate of the beneficiary of the agreement, contract, or plan pursuant to Section 32-7-20(A) or paid to the provider of a contract pursuant to Section 32-7-20(B).

(E) Subsections (A) and (B) do not apply to contracts for funeral service or merchandise funded by insurance policies which are otherwise regulated by law.

(F) The board shall approve forms for preneed funeral contracts. All contracts must be in writing, and no contract form may be used without prior approval of the board. Any use or attempted use of an oral preneed funeral contract or any written preneed funeral contract in a form not approved by the board is considered to be a violation of this chapter by the person selling services or merchandise under its provisions; provided, however, that minor modifications to a contract form furnished or approved by the board shall not invalidate the contract.

(G) All contracts must contain the name and Funeral Service License Number of the provider and seller.

(H) All funds received by the provider pursuant to the provisions of a contract governed by this chapter must be placed in trust in a federally insured account. The trustee may establish an individual trust for each contract or a common trust fund may be established with a financial institution which would maintain accounting for each individual deposit and furnish a quarterly report to the provider. The trust accounts must be carried in the name of the provider but accounting records must be maintained showing the amounts deposited and invested, and interest, dividends, increases, and accretions earned on it, with respect to each purchaser's contract. The trustee has the authority to transfer trust funds from one financial institution to another; provided, that the trustee must notify the purchaser within thirty days thereafter, or the beneficiary, if the purchaser dies.

(I) All earnings accrue in the trust except that the provider may withdraw ten percent of the annual earnings of the trust to cover trust administration.

(J) No preneed trust funds or earnings may be used as collateral, pledged, or in any way encumbered or placed at risk.

(K) If the purchaser fails to make payments as provided in the contract, the contract is voidable at the option of the provider and he may retain ten percent of the amount paid on the contract as a fee and return the remaining funds to the purchaser.

(L) If the merchandise selected is not available at the time of need, the provider shall make available to the purchaser or his representative merchandise of equal or greater value. The purchaser or his representative is entitled to approve any substitutions.

Section 32-7-25. The contracts governed by the provisions of this chapter may be made irrevocable at the option of the purchaser. If the purchaser selects an irrevocable contract he must be allowed thirty days to examine the contract. Within that period, the purchaser may revoke his decision to enter this contract and all monies paid by the purchaser must be refunded.

Section 32-7-30. (A) Within thirty days of receipt of a written demand for refund by any purchaser who has paid funds for a preneed funeral contract pursuant to Section 32-7-20(A) or (B) the trustee shall refund to the purchaser the entire amount paid together with all interest, dividends, increases, or accretions earned on the fund except that the provider will retain ten percent of the earnings in the portion of the final year before termination.

(B) After making refund to the trustee pursuant to the provisions of subsection (A) or (B), the financial institution is relieved from further liability to any party.

(C) This section does not apply if the contract is irrevocable.

Section 32-7-35. A preneed funeral contract may be transferred to another provider only at the prior written request of the purchaser or the beneficiary if the purchaser dies before the beneficiary, or pursuant to Section 32-7-45. The selling provider must be paid a fee equal to ten percent of the contract face amount. The selling provider also must be paid ten percent of the earnings in that portion of the final year before transfer.

Section 32-7-40. All trust funds mentioned in this chapter must be deposited in the name of the trustee, as trustee, within thirty days after receipt.

Section 32-7-45. If the provider goes out of business, it shall negotiate with the purchaser to transfer the trust fund to a provider of the purchaser's choice. The selling provider forfeits its right to any monies it otherwise would be entitled to.

Section 32-7-50. (A) No person may, without first securing from the board a license, accept or hold payments made on a preneed funeral contract, except financial institutions. Application for a license must be in writing, signed by the applicant and duly verified on forms furnished by the board. Each application must contain at least the following: the full name and address (both residence and place of business) of the applicant, and every member, officer, and director of it if the applicant is a firm, partnership, association, or corporation. Any license issued pursuant to the application must be valid only at the address stated in the application for the applicant or at a new address approved by the board.

(B) Upon receipt of the application, a one-time payment of a license fee, and the deposit in an amount to be determined by the board of such security or proof of financial responsibility as the board may determine, the board shall issue a license unless it determines that the applicant has made false statements or representations in the application, or is insolvent, or has conducted his business in a fraudulent manner, or is not duly authorized to transact business in this State, or if in the judgment of the board, the applicant should be denied a license for some other good and sufficient reason.

(C) A person selling a preneed funeral contract shall collect from each purchaser a service charge in an amount to be established by the board, and all fees collected must be remitted by the person collecting them to the board at least once each month, and these funds must be used by the board in administering the provisions of this chapter.

Section 32-7-60. (VACANT)

Section 32-7-70. The provider shall keep accurate accounts, books, and records in this State of all transactions, copies of all agreements, dates, and amounts of payments made and accepted on them, the names and addresses of the contracting parties, the persons for whose benefit funds are accepted, and the names of the depositories of the funds. The provider shall make all books and records pertaining to the trust funds available to the board for examination. The board may at any reasonable time investigate the books, records, and accounts of the provider with respect to its trust funds and for that purpose may require the attendance of and examine under oath all persons whose testimony it may require.

Section 32-7-80. (VACANT)

Section 32-7-90. (A) Any contract seller, provider, agent, employee, or person acting in behalf of one of these persons may not:

(1) directly or indirectly call upon individuals or persons in hospitals, rest homes, nursing homes, or similar institutions for the purpose of soliciting preneed funeral contracts or making funeral or final disposition arrangements without first having been specifically requested by the person to do so;

(2) directly or indirectly employ any agent, assistant, employee, independent contracting person, or any other person to call upon individuals or persons in hospitals, rest homes, nursing homes, or similar institutions for the purpose of soliciting preneed funeral contracts or making funeral or final disposition arrangements without first having been specifically requested by the person to do so;

(3) solicit relatives of persons whose death is apparently pending or whose death has recently occurred for the purpose of providing funeral services, final disposition, burial, or funeral goods for the person;

(4) solicit or accept or pay any consideration for recommending or causing a dead human body to be provided funeral services and funeral and burial goods by specific persons, or the services of a specific crematory, mausoleum, or cemetery except where the arrangement is the subject of a preneed funeral contract;

(5) solicit by telephone call or by visit to a personal residence, unless the solicitation has been previously requested by the person solicited or by a family member residing at the residence.

(B) Nothing in this chapter may be construed to restrict the right of a person to lawfully advertise, to use direct mail or otherwise communicate in a manner not within the above prohibition of solicitation or to solicit the business of anyone responding to the communication or otherwise initiating discussion of the goods or services being offered.

(C) Nothing in this chapter may be construed to prohibit general advertising.

(D) Anyone making a personal or written solicitation for a preneed funeral contract shall, as soon as possible, divulge the real reason for the contract or solicitation.

(E) The board may adopt regulations regulating the solicitation of preneed contracts by sellers and providers and their agents and employees to protect the public from solicitation practices which utilize undue influence or which take undue advantage of a person's ignorance or emotional vulnerability.

Section 32-7-100. Any person wilfully violating the provisions of this chapter is guilty of a misdemeanor and, upon conviction, must be fined not less than five hundred dollars nor more than one thousand dollars, or be imprisoned for not less than ten days nor more than six months, or both. In addition, this person may be prohibited from entering into any further preneed funeral contracts if the board, in its discretion, finds that the offense is sufficiently grievous. The revocation of a license under this section may be appealed to the circuit court in the licensee's county of residence.

Section 32-7-110. The board shall enforce the provisions of this chapter and has the power to make investigations, subpoena witnesses, require audits and reports, and conduct hearings as to violations of any provisions, and to promulgate such regulations as are necessary to carry out the provisions of this chapter.

Section 32-7-120. Nothing in this chapter of Title 32 modifies, abridges, or repeals any provision of Chapter 55 of Title 39. This chapter shall apply only to preneed funeral contracts sold by funeral homes licensed in this State and their licensed directors.

Section 32-7-130. Nothing in this chapter or in Chapter 55 of Title 39 precludes the sale at need of granite, memorials, or vaults by a licensed funeral director. However, a licensed funeral director may sell only vaults preneed in accordance with this chapter."

Definition

SECTION 2. Item 12 of Section 39-55-35 of the 1976 Code is amended to read:

"12. 'Merchandise' means items used in connection with grave space, niches, mausoleum crypts, granite, memorials, or vaults; provided, however, merchandise shall expressly exclude burial caskets, clothing, cremation urns, professional services, facilities used for preparation, viewing or services, and automotive equipment and transportation. Items expressly excluded under the definition of merchandise in this provision shall be governed by Chapter 7 of Title 32."

Time effective

SECTION 3. This act takes effect sixty days after approval by the Governor.