Bill Text: MI SB1377 | 2009-2010 | 95th Legislature | Engrossed
Bill Title: Probate; trusts; cross-reference to the estates and protected individuals code in the cemetery regulation act; correct to reflect adoption of Michigan trust code. Amends sec. 16 of 1968 PA 251 (MCL 456.536).
Spectrum: Slight Partisan Bill (Republican 2-1)
Status: (Passed) 2010-12-29 - Assigned Pa 0326'10 With Immediate Effect [SB1377 Detail]
Download: Michigan-2009-SB1377-Engrossed.html
SB-1377, As Passed House, December 2, 2010
SUBSTITUTE FOR
SENATE BILL NO. 1377
A bill to amend 1968 PA 251, entitled
"Cemetery regulation act,"
by amending section 16 (MCL 456.536), as amended by 2008 PA 478.
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), 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 only under 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 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. The cemetery shall enter into agreements of
irrevocable trust agreements with each trustee. Those agreements
shall provide that the investing of the assets are subject to the
Michigan prudent investor rule as set forth in sections 1501 to
1511
and 7302 1512 and 7803 of the estates and protected
individuals
code, 1998 PA 386, MCL 700.1501 to 700.1511 and
700.7302
700.1512 and 700.7803, except that the agreement shall not
be
modified or amended, as allowed under sections 1502(2) and 7302
7105 of the estates and protected individuals code, 1998 PA 386,
MCL
700.1502 and 700.7302 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 prior
to
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
which
cemetery that does not reserve, retain, or otherwise exercise
any
power of direction of specific investments, shall not be 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, 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), 1964 PA 265,
MCL
451.501 to 451.818, 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 trustee is not
required to heed such advice. 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 such the fiduciary liability
coverage shall be provided not less than annually to the
commissioner,
in a form to be determined by the commissioner, prior
to
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 shall not
be
are not liable, or otherwise punishable, for complying with such
the direction of investments except that the trustees shall retain
custody
of all such the investments.
(5)
Beginning the effective date of the amendatory act that
added
this subsection 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 total deposit for a single burial right sale or assignment
shall 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 sums
on
deposit 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 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 shall not be are
not responsible for
ascertaining
that such amounts money paid over to the cemetery are
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 registrant under this act to assure 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 funds money shall be deposited not later than the
month
following their 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 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 prior to
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 trust funds 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 shall 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 funds money received to the department of
treasury
for deposit in the general fund of the 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 600.9948 600.9947, apply to civil
actions filed pursuant to this section.