DOCSLIB.ORG

How Unclaimed Property Laws Impact Funds in Your Preneed Trust

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
How Unclaimed Property Laws Impact Funds in Your Preneed Trust BY WENDY RUSSELL WIENER We all recognize the benefit of general laws dealing with unclaimed property, which facilitate reuniting people with MISMATCHEDproperty they’ve lost track of – entirely M appropriate when the property is money in a bank account. But the op- eration of those laws on preneed trust funds is not entirely appropriate LAWS and can put trustees and licensees in an HOW UNCLAIMED impossible position. PROPERTY LAWS Let’s start by looking at the only two IMPACT FUNDS ways to fund a preneed contract. The first option is for the consumer to pay IN YOUR PRENEED the funeral home, which must then de- posit some or all of the money into trust. TRUST. The other option is for the consumer to purchase a life insurance policy; the same three circumstances – fulfillment, NOW THAT ACTION HAS BEEN TAKEN IN death benefit payable under that policy cancellation or default. SOME STATES, THEY'VE GONE ABOUT is assigned to the funeral home so that Thus, the trust funds are locked up the firm will receive some or all of the by both law and contract, and they can IT INCORRECTLY, AMENDING ONLY money upon the death of the preneed only be accessed when one of the three GENERAL UNCLAIMED PROPERTY LAWS contract beneficiary. conditions occur. WHILE IGNORING SPECIFIC PRENEED Only one of these funding mecha- Few states include, within their pre- nisms – insurance – is exempt from the need laws, direction to the funeral TRUST LAWS. BY DOING SO, STATES reach of the unclaimed property laws home or trustee on how to handle pre- HAVE LITERALLY ENACTED LAWS THAT in some states. need trust funds that would be consid- REQUIRE ILLEGAL ACTIVITY. This is a good place to mention that ered unclaimed. For those states that the treatment of preneed contract fund- do, I say: “You got it right!” ing mechanisms by the various states’ For those that don’t, I posit that in- the need to address the abandonment unclaimed property laws is inconsis- cluding a reference to preneed trust of preneed trust funds until recently. tent. Some state laws don’t treat the funds in your general unclaimed prop- And now that action has been taken funding vehicles (trusts or insurance) at erty law falls short when the law fails in some states, they’ve gone about it in- all, some address the abandonment of to, more importantly, address the issue correctly – amending only the general trust funds, some address the abandon- within the preneed trust law. unclaimed property laws while ignor- ment of insurance policies and some A preneed trustee should not be ing the specific preneed trust laws that address the abandonment of both. forced to violate the specific state laws expressly prohibit releasing preneed The imbalance in the treatment of limiting its disbursement of preneed trust funds to the state. the two funding vehicles is highlight- trust funds without fear that it will, at a By doing so, states have literally en- ed by the fact that some states have en- minimum, lose funeral home clients or, acted laws that require illegal activi- acted a version of the National Council at a maximum, lose its authority to act ty. Those laws leave deathcare profes- of Insurance Legislators Model Un- as a trustee. Likewise, a funeral home sionals in an impossible position and claimed Life Insurance Benefits Act, should not be forced to instruct its should not be followed. which expressly excludes from the defi- trustee to distribute funds to a state as Finally, you may also be thinking nition of “policy” “any policy… used to unclaimed property because the death- back to the beginning of this article, fund a preneed funeral contract or pre- care laws do not give the funeral home where it was pointed out that insur- arrangement.” Why would one fund- the right to issue that instruction. ance policies that fund preneed con- ing mechanism be exempt and the oth- Though many general unclaimed tracts are exempt from being deemed er not be? property laws include a provision that abandoned in some states. The way many state regulators seek to indemnifies a holder of property when You may wonder why there’s a differ- apply unclaimed property laws to pre- the holder turns the property over to ence in treatment. Good for you! Per- need trust funds is as follows. Funds in the state, that indemnification will not haps the relevant insurance legislators trust are considered unclaimed when protect a licensee or trustee that know- recognized there is more than just one one of three circumstances occur: 1) the ingly violates the law. Put another way, contract involved in a preneed transac- age of the contract is more than a cer- you and your trustee could face seri- tion: the preneed contract and the in- MISMATCHED tain number of years, 2) the age of the ous consequences if you release trust surance policy or trust agreement. That contract beneficiary exceeds a certain funds to the state based on the gener- realization and treatment should be number of years, and 3) the beneficia- al unclaimed property law when your carried over to trust agreements as well. ry of the contract can be located in the state preneed trust law doesn’t also au- If states seek to amend how to ap- Social Security Administration’s Death thorize it. Some of the consequences proach a preneed contract that won’t be Master File. Once deemed unclaimed, include losing your license or authority fulfilled, that direction should be giv- funds in the preneed trust must be sent to act as a trustee, as well as facing civil en in the preneed law and nowhere else. to the treasury of the state in which the and/or criminal penalties. The preneed law is the place in which preneed contract was written. Philosophically, you may wonder: both contracts – preneed and funding Here’s the problem with that. In the “Why would I want to keep money in vehicle – can be addressed. Referenc- application of general unclaimed prop- trust for preneed contracts I will nev- es to preneed trust funds or insurance erty laws to preneed trust funds in er fulfill?” policies in the general unclaimed prop- most states, the holder/trustee is actu- The answer is simple: Most state pre- erty laws in isolation are ineffective. ally prohibited from releasing the trust need laws just don’t allow for you to do funds under any circumstance other anything else. It’s not that the funeral Wendy Russell Wiener is a partner than fulfillment, cancellation or default profession is greedy and wants to keep with Nelson Mullins Broad and under the preneed contract. And most families separated from monies to Cassel law firm, general counsel preneed trust agreements also limit which they may legally be entitled, but for Funeral Services Inc. and a the distribution of trust funds to those rather, state lawmakers did not foresee regulatory consultant nationwide. www.nfda.org July 2019 71.
Load more

Recommended publications
  • South Dakota Vs. Minnesota Trust Law Desk Reference Guide
    South Dakota vs. Minnesota Trust Law Desk Reference Guide Advantage South Dakota Minnesota For over 30 years, SD has been Like many states, MN has one of the best places to locate attempted to catch up to SD by a trust. A unique and active implementing the Uniform legislative trust committee, Trust Code. However, the Trust Location (Situs) favorable Legislature and difference is still clear and governor support continues to distinct, and the state does not rank SD as a top tier trust have the stability or support jurisdiction state; as verified by that SD enjoys from the industry leaders. government. In addition to many other taxes, MN taxes its trusts. In 2018, the There is no state personal, Fielding v. Commissioner of corporate, or fiduciary income Revenue decision highlighted tax, as well as no state tax on this major difference, holding State Taxes capital gains, dividends, that a trust set up as a MN trust interest, intangibles, or any may not need to stay a resident other income. This equates to trust for tax purposes for the NO state taxes on trust income. entire length of the trust (depending on circumstances). A Dynasty Trust has unlimited possibilities because there is no Rule Against Perpetuities MN has a Rule Against The Dynasty Trust - Legacy (abolished in 1983). Dynasty Perpetuities. By statute, all Trusts avoid federal estate and non-vested interests must vest Planning for Generations income taxation on trust assets (pass) 21 years after death of an because there is no forced asset individual or 90 years after its distribution and the bonus of creation.
    [Show full text]
  • Imperfect Gifts As Declarations of Trust: Unapologetic Anomaly Sarajane Love Rutgers University-Camden
    Kentucky Law Journal Volume 67 | Issue 2 Article 3 1978 Imperfect Gifts as Declarations of Trust: Unapologetic Anomaly Sarajane Love Rutgers University-Camden Follow this and additional works at: https://uknowledge.uky.edu/klj Part of the Estates and Trusts Commons Right click to open a feedback form in a new tab to let us know how this document benefits you. Recommended Citation Love, Sarajane (1978) "Imperfect Gifts as eD clarations of Trust: Unapologetic Anomaly," Kentucky Law Journal: Vol. 67 : Iss. 2 , Article 3. Available at: https://uknowledge.uky.edu/klj/vol67/iss2/3 This Article is brought to you for free and open access by the Law Journals at UKnowledge. It has been accepted for inclusion in Kentucky Law Journal by an authorized editor of UKnowledge. For more information, please contact [email protected]. IMPERFECT GIFTS AS DECLARATIONS OF TRUST: AN UNAPOLOGETIC ANOMALY By SARAJANE LovE* One fundamental proposition is that, under a legal system recognizing the individualistic institution of private property and granting to the owner the power to determine his succes- sors in ownership, the general philosophy of the courts should favor giving effect to an intentional exercise of that power.' INTRODUCTION Ethel Yahuda was a widow who wished to give a library of Hebrew manuscripts collected by her and her late husband to the Hebrew University in Israel. She announced her gift at a public luncheon in Israel and upon her return to the United States began to catalogue and crate the collection for shipment to the university. Her intention to go forward with the gift was repeatedly expressed to friends and to the university.
    [Show full text]
  • Southampton Student Law Review 2014 Volume 4, Issue 1
    Southampton Student Law Review 2014 volume 4, issue 1 1 Southampton Student Law Review Southampton Law School Published in the United Kingdom By the Southampton Student Law Review Southampton Law School University of Southampton SO17 1BJ In affiliation with the University of Southampton, Southampton Law School All rights reserved. Copyright© 2014 University of Southampton. No part of this publication may be reproduced, transmitted, in any form or by any means, electronic, mechanical, recording or otherwise, or stored in any retrieval system of any nature, without the prior, express written permission of the Southampton Student Law Review and the author, to whom all requests to reproduce copyright material should be directed, in writing. The views expressed by the contributors are not necessarily those of the Editors of the Southampton Student Law Review. Whilst every effort has been made to ensure that the information contained in this journal is correct, the Editors do not accept any responsibility for any errors or omissions, or for any resulting consequences. © 2014 Southampton Student Law Review www.southampton.ac.uk/law/lawreview ISSN 2047 - 1017 This volume should be cited (2014) 4(1) S.S.L.R. Editorial Board 2014 Editors-in-Chief Elizabeth Herbert Ida Petretta Editorial Board Neil Brown Louise Cheung Dingjing (James) Huang Ebenezer Laryea Henry Pearce Viktor Weber Acknowledgements The Editors wish to thank our academic advisor Professor Oren Ben-Dor for his advice, commitment and support The Editors also wish to thank all members
    [Show full text]
  • The Early Autumn Edition of Trust Espeaking. Inside We Have What We Hope Are Interesting and Useful Articles. Trusts
    ISSUE 16 | AUTUMN 2013 GREG KELLY LAW LIMITED Level 6 Change House, 150 Featherston Street, Wellington | PO Box 25-243, Panama St, Wellington 6146, New Zealand Ph: 04 498-8500 | Fax: 04 499-5193 | E-mail: [email protected] | www.trustlaw.co.nz Welcome to the early Autumn edition of Trust eSpeaking. Inside we have what we hope are interesting and useful articles. If you would like to talk further about any of the material in this newsletter, or about trusts in general, then please don’t hesitate to contact us. Inside: Trusts and Avoidance of Rest Home Fees All quite tricky It was very common in the 1990s for New Zealanders to set up discretionary family trusts in the hope that by putting assets in the name of a trust, they could qualify for rest home subsidies in the event that they were required to go into rest home care. This certainly worked for a number of years. Things have changed, however, and this article looks at a recent case that challenged that proposition… CONTINUE READING Right to Decide About Funeral and Burial Still some uncertainties Arguments over where the late Mr James Takamore should be buried have led to a long-running legal dispute. Now the Supreme Court has spoken, but its decision in Takamore v Clarke leaves some questions unanswered… CONTINUE READING Law Commission’s Key Proposals for New Trusts Legislation Whilst the Law Commission is reviewing trust law, we’ve undertaken to keep you up-to-date with its recommendations; which is much easier than you having to read the 300+ pages of the Commission’s report… CONTINUE READING If you do not want to receive this newsletter, please unsubscribe.
    [Show full text]
  • Michigan Probate & Estate Planning Journal Winter 2016
    MICHIGAN PROBATE & ESTATE PLANNING JOURNAL TABLE OF CONTENTS Vol. 36 M Winter 2016 M No. 1 Featured Articles: From the Probate Litigation Desk: Obser- vations on Undue Influence David L.J.M. Skidmore .......................... 3 New Year’s Resolutions for Trustees and Beneficiaries: Ten Fiduciary Income Tax Planning Considerations Raj A. Malviya and Jonathan K. Beer .. 13 Two Matters Improperly Decided By the Michigan Court of Appeals: In Re Estate of Sabry Mohammad Attia and In Re Estate of James V Ward Alan A. May ......................................... 27 Conflicts of Interest in Estate Planning and Litigation (Or “How Many Hats Are Too Many?”) Robert S. Zawideh ............................... 31 Long-Awaited Probate Appeals Legisla- tion Brings Uniformity and Efficiency Liisa R. Speaker ................................... 36 Pets Put Their Trust in Us—Put Them in the Trust: Default Provisions That Protect Pets Rebecca Wrock .................................... 41 Why Would You Worry About Proposed Regulations to Section 2704? Lorraine F. New ................................... 45 STATE BAR OF MICHIGAN PROBATE AND ESTATE PLANNING SECTION Subscription Information The Michigan Probate and Estate Planning Journal is Michigan Probate and Estate Planning Journal published three times a year by the Probate and Estate M M Planning Section of the State Bar of Michigan, with the Vol. 36 Winter 2016 No. 1 cooperation of the Institute of Continuing Legal Education, and is sent electronically to all members of the Section. Lawyers newly admitted to the State Bar automatically become members of the Section for two years following their date of TABLE OF CONTENTS admission. Members of the State Bar, as well as law school students, may become members of the Section by paying annual dues of $35.
    [Show full text]
  • The Functions of Trust Law: a Comparative Legal and Economic Analysis, 73 N.Y.U
    University of California, Hastings College of the Law UC Hastings Scholarship Repository Faculty Scholarship 1998 The uncF tions of Trust Law: A Comparative Legal and Economic Analysis Ugo Mattei UC Hastings College of the Law, [email protected] Follow this and additional works at: http://repository.uchastings.edu/faculty_scholarship Part of the Comparative and Foreign Law Commons, and the Estates and Trusts Commons Recommended Citation Ugo Mattei, The Functions of Trust Law: A Comparative Legal and Economic Analysis, 73 N.Y.U. L. Rev. 434 (1998). Available at: http://repository.uchastings.edu/faculty_scholarship/529 This Article is brought to you for free and open access by UC Hastings Scholarship Repository. It has been accepted for inclusion in Faculty Scholarship by an authorized administrator of UC Hastings Scholarship Repository. For more information, please contact [email protected]. Faculty Publications UC Hastings College of the Law Library Mattei Ugo Author: Ugo Mattei Source: New York University Law Review Citation: 73 N.Y.U. L. Rev. 434 (1998). Title: The Functions of Trust Law: A Comparative Legal and Economic Analysis Originally published in NEW YORK UNIVERSITY LAW REVIEW. This article is reprinted with permission from NEW YORK UNIVERSITY LAW REVIEW and New York University School of Law. THE FUNCTIONS OF TRUST LAW: A COMPARATIVE LEGAL AND ECONOMIC ANALYSIS HENRY HANSMANN* UGO MATTEI** In this Article, ProfessorsHenry Hansmann and Ugo Mattei analyze the functions served by the law of trusts and ask, first, whether the basic tools of contract and agency law could fulfill the same functions and, second, whether trust law provides benefits that are not provided by the law of corporations.
    [Show full text]
  • Andrew M. Katzenstein
    Contact Andrew M. Katzenstein Partner Los Angeles +1.310.284.4553 [email protected] Andrew M. Katzenstein is a partner in the Private Client Services Department where he assists high net worth individuals, companies and charitable organizations with all aspects of tax and estate planning. He focuses his practice on tax planning matters, which include estate, gift and generation-skipping tax planning, as well as income tax of trust planning, probate and trust administration matters, resolving disputes between fiduciaries and beneficiaries, and charitable planning. Chambers USA consistently ranks Andy among the leading tax attorneys in the country, and highly regards his estate planning expertise in advising wealthy individuals and charitable organizations on a range of matters, including tax planning, trust administration and philanthropic giving. A client is quoted as saying, "He's extraordinarily knowledgeable and creative. He's one of the smartest estate planners in the US and I learn a lot from him. He's a pleasure to work with - he gets very deeply engaged with his clients and he gets to the point very quickly in a friendly and professional way. He makes clients comfortable that they're with the best planner around. He delivers quickly and efficiently and he has outstanding technical skills - 11/10." Andy is a much sought-after speaker on estate planning and probate issues and has appeared on CBS’ 48 Hours Mystery, NPR, and served as host of KFNX’s weekly radio talk show “Principal of the Matter,” which addressed a variety
    [Show full text]
  • Proponent Testimony on House Bill 595 Patricia D. Laub, Chair of the OSBA Estate Planning, Trust & Probate Law Section
    Proponent Testimony on House Bill 595 Patricia D. Laub, Chair of the OSBA Estate Planning, Trust & Probate Law Section Wednesday, May 16, 2018 Chairman Butler, Vice-Chair Lanese, Ranking Member Boggs and Members of the House Civil Justice Committee. I am Patricia D. Laub, attorney with Frost Brown Todd LLC, and the chair of the Ohio State Bar Association’s Estate Planning, Trust and Probate Law Section (EPTPL). I am here on behalf of the OSBA to provide proponent testimony on HB595. The bill affectionately known as the 132nd GA Omnibus Probate Bill. The bill includes five important probate law changes that the OSBA’s Council of Delegates have approved. PROPOSAL 1: TO AMEND OHIO LAW GOVERNING A CORONER'S OBLIGATIONS OF NOTIFICATION TO MAKE IT CONSISTENT AND FREE OF CONFLICT WITH THE LAW CONCERNING RIGHT OF DISPOSITION. Sections 2108.70 to 2108.90 of the Ohio Revised Code were added, effective October 12, 2006, to assign to certain persons the right of disposition (burial or cremation) of a deceased person's body. Under Section 2108.72 of the Ohio Revised Code, a person, known as the declarant, may sign a written declaration conferring such rights on another person upon the declarant's death. If there is no such declaration, or if all named persons are deceased or otherwise unable to act, then there is a detailed statutory order of priority assigning the right of disposition under Section 2108.81(B) of the Ohio Revised Code. Section 313.14 of the Ohio Revised Code governs the duties of a coroner to notify certain persons that the coroner has possession of a deceased body.
    [Show full text]
  • A Handbook for Trustees (2020 Edition)
    A Handbook For Trustees (2020 Edition) Administering a Special Needs Trust TABLE OF CONTENTS INTRODUCTION AND DEFINITION OF TERMS ................4 Pre-paid Burial/Funeral Arrangements .............. 11 Grantor .....................................................4 Tuition, Books, Tutoring ................................ 11 Trustee .....................................................4 Travel and Entertainment ............................. 11 Beneficiary .................................................4 Household Furnishings and Furniture ................ 11 Disability ...................................................4 Television, Computers and Electronics .............. 11 Incapacity ..................................................4 Durable Medical Equipment ........................... 12 Revocable Trust ...........................................5 Care Management ...................................... 12 Irrevocable Trust ..........................................5 Therapy, Medications, Alternative Treatments ..... 12 Social Security Disability Insurance ....................5 Taxes ...................................................... 12 Supplemental Security Income .........................5 Legal, Guardianship and Trustee Fees ............... 12 Medicare ...................................................5 Medicaid ....................................................5 LOANS, CREDIT, DEBIT AND GIFT CARDS .................. 12 THE MOST IMPORTANT DISTINCTION .........................5 TRUST ADMINISTRATION AND ACCOUNTING .............
    [Show full text]
  • December 16Th, 2020 Senate Judiciary Committee HB 464, Trust Law Written Testimony from Caressa Hughes, Assistant Vice Preside
    December 16th, 2020 Senate Judiciary Committee HB 464, Trust Law Written Testimony from Caressa Hughes, Assistant Vice President of Government and Industry Relations, SCI Shared Resources Chairman Eklund, Ranking Minority Member Thomas, and members of the Senate Judiciary Committee. Thank you for the opportunity to submit written testimony on House Bill 464, Trust Laws, particularly as it relates to updating cemetery endowment care trust statute. Service Corporation International (SCI) Shared Resources is North America’s leading provider of funeral, crematory and cemetery services. Our nearly 25,000 associates serve more than 450,000 families who turn to us each year to care for their loved ones. In Ohio, we have forty- five funeral homes, crematories and cemeteries. The bill’s endowment care trust provisions address a much-needed update to Ohio’s cemetery endowment care trust statute. The provisions added to the bill essentially align components of the cemetery trust statute with Ohio’s existing unitrust statute for investment purposes and allows more funds and safeguards for the maintenance of private, regulated cemeteries. Twenty other states similarly have already updated their statutes. The bill does not affect family cemeteries, nonprofit cemeteries, cemeteries operated by churches. It only addresses regulated cemeteries. Attached below is the LSC analysis of the provisions and a fact sheet on endowment care trusts and the provisions of the bill. Through the government affairs counsel of The Success Group, we worked with all the interested parties including The Ohio State Bar Association, Department of Commerce, Ohio Township Association, Ohio Cemetery Association, and Ohio Funeral Directors Association. All are either supportive or neutral.
    [Show full text]
  • Speaking for the Dead: Voice in Last Wills and Testaments Karen J
    St. John's Law Review Volume 85 Article 12 Issue 2 Volume 85, Spring 2011, Number 2 April 2014 Speaking for the Dead: Voice in Last Wills and Testaments Karen J. Sneddon Follow this and additional works at: http://scholarship.law.stjohns.edu/lawreview Recommended Citation Sneddon, Karen J. (2014) "Speaking for the Dead: Voice in Last Wills and Testaments," St. John's Law Review: Vol. 85: Iss. 2, Article 12. Available at: http://scholarship.law.stjohns.edu/lawreview/vol85/iss2/12 This Article is brought to you for free and open access by the Journals at St. John's Law Scholarship Repository. It has been accepted for inclusion in St. John's Law Review by an authorized administrator of St. John's Law Scholarship Repository. For more information, please contact [email protected]. ARTICLE SPEAKING FOR THE DEAD: VOICE IN LAST WILLS AND TESTAMENTS KARENJ. SNEDDONt INTRODUCTION ................................. ..... 684 I. FUNCTION OF WILLS ........................... .......685 II. VOICE ..................................... ...... 689 A. Term Defined. ...................... ....... 689 B. Applicability of Voice to Wills ............ ..... 696 C. Pitfalls.......................... ........ 708 D. Benefits ............................ ..... 720 III. VOICE IN WILLS ........................... ..... 728 A. Voice in Non-Attorney Drafted Wills ...... ...... 728 1. Nuncupative Wills ................. ...... 729 2. Ethical Wills...... ................. 729 3. Holographic Wills .................. ..... 732 4. Commercial Fill-in-the-Blank Forms and
    [Show full text]
  • FUNERAL PLANNING: Options for You and Your Family
    FUNERAL PLANNING: Options for You and Your Family Funeral Planning 1 FUNERAL PLANNING: OPTIONS FOR YOU AND YOUR FAMILY As citizens of a culture that worships youth, most of us find it nearly impossible to admit our own mortality, much less make plans for that eventuality. Denial, however, offers no protection from the inevitable. As it turns out, we have far more to gain than to lose by sitting down in advance to plan for every contingency life may throw at us. To help you begin this important process, here is an essential item that should be on your list of basic estate planning objectives. FUNERAL PLANNING For survivors, the hours and days following a loved one’s death is no time for weighty decisions. For many Americans, however, this will be the first time they think about the preparations for their loved one’s funeral. Given the expense and the painful emotions often involved, survivors may be in no condition to make choices for themselves or their loved one. With funeral expenses increasing every year, it is an expense that can quickly escalate as survivors confront a bewildering range of options on everything, from the kind and quantity of flowers, to the quality of their loved one’s casket. A premium casket alone, for example, can exceed $15,000. Add in the expense of roses over carnations and live music over recorded music; and survivors can end up paying triple or quadruple the average funeral’s cost. Yet, without a plan to guide them, survivors may feel guilty about saying anything but “yes” to the best for their loved one.
    [Show full text]