10.29.06 Preneed Contract Flashcards Preview

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Flashcards in 10.29.06 Preneed Contract Deck (56):
1

These regulations apply to all preneed contracts entered into by a licensed mortician, a licensed funeral director, and a holder of a surviving spouse license with a buyer.

10.29.06.01 Scope

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The report required annually to document those preneed trust accounts established in 1998 and after 1998.

Annual Report

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Funeral arrangements made after the death of an individual by one authorized to make those arrangements.

At Need

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The individual on whose behalf the preneed contract is purchased.

Beneficiary

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The state board of morticians and funeral directors.

Board

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An individual who agrees to buy certain mortuary science services and merchandise in a preneed contractual arrangement.

Buyer

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A combination casket and outer burial enclosure.

Casket Vault

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Preneed contract.

Contract

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An arrangement, which cannot be revoked after its creation, by which property is transferred with the intention that it be administered by a trustee for another's benefit.

Irrevocable Trust

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An individual who has been issued either a mortician, funeral director, or surviving spouse license by the Board.

Licensee

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The form provided by the Board to show the allocation of preneed funds.

Preneed Addendum Form

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An agreement entered into by a licensed mortician, a licensed funeral director, or holder of a surviving spouse license with a buyer in advance of the death of that individual or beneficiary.

Preneed Contract

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A licensed mortician, licensed funeral director, or holder of a surviving spouse license who agrees to sell certain mortuary science services or merchandise in a preneed contractual arrangement between a buyer and a funeral establishment.

Seller

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The seller of preneed mortuary services or merchandise selected under the terms of an irrevocable trust arrangement established on behalf of the beneficiary for the purpose of eligibility for Social Security or other governmental benefits.

Trustee

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The seller has died or become disabled, or that the funeral service business has discontinued.

Unable to Perform

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Only a licensed mortician, licensed funeral director, or holder of a surviving spouse license may make prearrangements and execute preneed contracts with buyers.

10.29.06.03 Execution of Preneed Contract

A

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The seller shall present to the buyer a preneed contract which contains all of the information set forth in Health Occupations Article 7-404, Annotated Code of Maryland.

10.29.06.03 Execution of Preneed Contract

B

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The seller and buyer of a preneed contract shall execute the contract in duplicate, with a copy of the original contract given to the buyer at the time that the contract is signed.

10.29.06.03 Execution of Preneed Contract

C

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  1. The time required for fulfilling the terms and conditions of the contract;
  2. The cancellation terms; and
  3. The condition of refunds.

10.29.06.03 Execution of Preneed Contract

D. The Seller Shall State in the Preneed Contract:

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On June 15 of every year, the seller shall file with the Board a report on forms provided by the Board which includes:

  1. A certification by a certified public accountant of the seller's compliance with Health Occupation Article 7-405, Annotated Code of Maryland; and
  2. Any other information the Board considers necessary.

10.29.06.03 Execution of Preneed Contract

E

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A preneed contract may be funded by a life insurance policy or an annuity contract.

10.29.06.03 Execution of Preneed Contract

F

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A seller who funds preneed contracts using a life insurance policy or an annuity shall have an insurance license.

10.29.06.03 Execution of Preneed Contract

G

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  1. Give the buyer a copy of the completed contract form signed and executed by the licensee, buyer, and insurance agent at the conclusion of preneed arrangements.
  2. Ensure that the insurance company listed on the application for insurance is the recipient of the payment when the buyer is executing payment;
  3. Send a copy of the certificate of insurance to the buyer immediately upon receipt of the approved insurance policy; and
  4. Present a copy of a filed death certificate policy claim form and other information required by the insurance company for payment of services provided under the preneed insurance contract.

10.29.06.03 Execution of Preneed Contract

H. A Seller who Funds Preneed Contracts Using a Life Insurance Policy or Annuity Shall:

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Funds may not be transferred from a money-trust to an insurance-funded vehicle without the approval and signature on the insurance application of the buyer or legal representative of the buyer.

10.29.06.03 Execution of Preneed Contract

I.

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Within 10 days of recieving payment under a preneed contract, the seller shall deposit into an interest-bearing escrow or trust account that is insured by the Federal Deposit Insurance Corporation (FDIC):

  1. An amount from the payment that is equal to at least 80 percent of the selling price of a casket or casket vault under the preneed contract; and
  2. 100 percent of the payment that is for all other goods and services under the preneed contract.

10.29.06.04 Disposition of Preneed Contract Fund

A

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The seller need not have a separate interest-bearing escrow or trust account for each preneed contract executed.

10.29.06.04 Disposition of Preneed Contract Fund

B

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The seller may place in the escrow account with the other funds up to 100 percent of the price of the casket or casket vault.

10.29.06.04 Disposition of Preneed Contract Fund

C.

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  1. The interest or dividends earned by the interest-bearing escrow or trust account belongs to the buyer o the contract.
  2. The seller shall send to the buyer a tax form stating the amount of the interest accumulated in the account each year that the contract is in effect until the time of death of the beneficiary.
  3. It is the responsibility of the buyer to pay the taxes due on that interest.
  4. Money remaining in the interest-bearing escrow or trust account after the performance of the contract belongs to the seller.

10.29.06.04 Disposition of Preneed Contract Fund

D. Interest on Preneed Contract Fund

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The seller may not withdraw from the account the money recieved from the buyer unless the services and merchandise have been provided as agreed to in the contract or unless the buyer terminates the contract.

10.29.06.04 Disposition of Preneed Contract Fund

E.

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  1. The buyer or legal representative of the buyer forwards a notarized statement and withdrawal request stating that the seller may:
    1. Cancel the prepaid contract is revocable; or
    2. Transfer the monies to a named substitute trustee if the prepaid contract is irrevocable; or
  2. The funeral home presents a copy of a filed or certified death certificate to the banking institution holding the account funds for payment of services provided under a preneed contract.

10.29.06.04 Disposition of Preneed Contract Fund

F. The Seller may Withdraw Money from the Account if one of the Following Conditions are met:

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  1.  A general price list of all goods and services for the buyer to keep;
  2. A statement of goods and services that are reasonably expected to be required at the time of need, but are not included in the preneed contract;
  3. Information concerning cancellation and refund rights under Health Occupations Article 7-405, Annotated Code of Maryland;
  4. A receipt for all monies recieved and a copy of the completed forms signed and executed by the seller and the buyer; and
  5. A copy of the deposit slip showing the amount of preneed funds deposited into an interest-bearing escrow or trust account with an FDIC insured account under Regulation .04A of this chapter.

10.29.06.05 Obligations of Seller

A. A Seller Shall Provide the Buyer with:

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The seller shall perform the contract according to the contract's terms and the agreed upon price.

10.29.06.05 Obligations of Seller

B.

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The seller shall substitute comparable merchandise when the specified merchandise is unavailable.

10.29.06.05 Obligations of Seller

C.

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The seller is not responsible for those events which are beyond the seller's control, such as changes in cemetery requirements.

10.29.06.05 Obligations of Seller

D.

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Nothing in this regulation shall prohibit a funeral home from its rights to transfer escrow or trust accounts from one institution to another FDIC insured banking institution. The funeral home shall provide the new account information to the buyer along with a copy of the deposit slip within 30 days after transferring preneed funds.

10.29.06.05 Obligations of Seller

E.

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The funeral establishment and the establishment's supervising mortician shall be responsible for providing the services contracted. In the case of a funeral establishment owned by a corporation licensed under Health Occupations Article 7-309, Annotated Code of Maryland, the supervising mortician and the corporation shall be responsible for the services provided.

10.29.06.05 Obligations of Seller

F.

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Except as otherwise provided in this regulation, a preneed contract may not be terminated by the seller.

10.29.06.06 Termination of Preneed Contract

A.

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Except as otherwise provided in this section, a seller may not withdraw from the preneed intrest-bearing escrow or trust account the money recieved from a buyer unless the services and merchandise agreed to in the contract have been provided.

10.29.06.06 Termination of Preneed Contract

B.

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At the time a preneed contract is terminated, the seller shall refund to the buyer the payments and interest held for the buyer, if any one of the following conditions occur:

  1. The buyer or the legal representative or representatives of the buyer demands in writing a refund of the payments made except as set forth in Regulation .09 of this chapter;
  2. The business of the seller is discontinued;
  3. The seller is unable to perform under the terms and conditions of the preneed contract for reasons other than an increase in the cost of goods and services; or
  4. The buyer fails to pay the entire contract before the death of the beneficiary.

10.29.06.06 Termination of Preneed Contract

C.

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If the death of the buyer or beneficiary occurs before the terms and conditions of the preneed contract are met, the buyer or legal representative of the beneficiary shall be given the option of withdrawing all funds paid and interest accrued or renegotiating a contract with mutally agreed upon financial adjustments.

10.29.06.07 Premature Death of Beneficiary or Buyer

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A funeral corporation or establishment whcih is in the process of being sold shall file with the Board a list of preneed contracts and document that the money resulting from the preneed contracts has been set aside in an interest-bearing, federally insured escrow or trust account.

10.29.06.08 Sale or Change in the Ownership of a Funeral Corporation or Establishment

A.

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The seller of the funeral corporation or establishment shall document that arrangements havebeen made with the buyer and with another licensee to honor the preneed contracts.

10.29.06.08 Sale or Change in the Ownership of a Funeral Corporation or Establishment

B.

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The seller shall notify the buyers of the preneed contract that the business is being sold and give the buyers an opportunity to either continue the same contractual arrangements with the new owner or to demand a refund of the money paid into the interest-bearing escrow or trust account.

10.29.06.08 Sale or Change in the Ownership of a Funeral Corporation or Establishment

C.

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On the death or disability of the seller or if the seller loses or is unable to use that individual's license, the partners or surviving spouse shall notify the Board and document that the preneed contract money has been set aside and reamains inviolate, and that arrangements have been made to honor the preneed contracts.

10.29.06.08 Sale or Change in the Ownership of a Funeral Corporation or Establishment

D.

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On the death or disability of the seller or if the seller loses or is unable to use that individual's license, the buyer of the preneed contract shall be contacted and given an opportunity to either continue the arrangement with the remaining partners or surviving spouse or to demand a refund of the money paid into the interest-bearing escrow or trust account.

10.29.06.08 Sale or Change in the Ownership of a Funeral Corporation or Establishment

E.

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If a licensee files for bankruptcy and that bankruptcy involves assets which include preneed contracts and bank accounts, the bankrupt, or the trustee appointed by the court to handle the bankruptcy shall:

  1. Notify the Board of that bankruptcy filing;
  2. Document to the Board the number of preneed accounts that exist;
  3. Identify the bank accounts for those preneed documents; and
  4. Make assurances to the Board that the preneed accounts will be honored.

10.29.06.08 Sale or Change in the Ownership of a Funeral Corporation or Establishment

F.

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If a licensee files for bankruptcy, the licensee shall notify the buyer of a preneed contract of the filing and give the buyer an opportunity to terminate the contract and obtain a full refund of the moeny paid under the preneed contract or to make arrangements to continue the agreement with the bankrupt seller or another seller.

10.29.06.08 Sale or Change in the Ownership of a Funeral Corporation or Establishment

G.

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A buyer ma establish an irrevocable trust with respect to all or any portion of the payment made under the contract in an interest-bearing, federally insured escrow or trust account held by the seller, but only for the purpose of entitling the buyer to be eligible for current Social Security benefits or for benefits under any other plan that restricts eligibility to those with limited assets.

10.29.06.09 Irrevocable Trusts

A.

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  1. The appointment of a trustee to sign all necessary papers to effectuate the contract upon the death of the buyer;
  2. That the disposition of income earned by the trust inures to the benfit of the buyer;
  3. The transfer for trust funds, if required; and
  4. The disposition of the trust funds if:
    1. The business of the seller is discontinued,
    2. The seller is unable to perform under the terms and conditions of the preneed contract, or
    3. The buyer fails to pay the entire contract price beore the death of the beneficiary.

10.29.06.09 Irrevocable Trusts

B. The Seller Shall Present to the Buyer a Document Establishing the Irrevocable Trust Which Provides:

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The buyer or legal representative of the buyer shall retain the right to appoint, as trustee of the irrevocable trust, a substitute trustee.

10.29.06.09 Irrevocable Trusts

C.

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If the buyer who sets up an irrevocable trust terminates the preneed contract with the seller, the buyer and seller shall take the following actions:

  1. The seller shall maintain the funds in trust for the beneficiary until a substitute seller is selected;
  2. The buyer shall enter into a new preneed contract with the substitute seller; and
  3. The seller shall transfer the trust funds to the substitute seller for placement in a separate interest-bearing escrow account or trust account.

10.29.06.09 Irrevocable Trusts

D.

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Notwithstanding the provisions set forth in these regulations, when a buyer terminates the preneed contract, the funds contained in the irrevocable trust may not be returned to the buyer but the seller shall maintain the funds in trust for the beneficiary.

10.29.06.09 Irrevocable Trusts

E.

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Funds maintained in an irrevocable trust are not counted as assets with respect to the buyer's Social Security benefits, Medical Assistance eligibility, or any other plan which restricts eligibility to those with limited assets.

10.29.06.09 Irrevocable Trusts

F.

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The seller shall provide in the document establishing a trust the following notice, conspiciously displayed in 10-point boldface type:

"This document creates an irrevocable trust. Under the terms of this document, a buyer may not receive a refund of any payments made for the preneed burial or cremation contract."

10.29.06.09 Irrevocable Trusts

G.

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  1. The owner or director of a corporation licensed issued by the Board who is not also a licensed mortician, funeral director, or holder of a surviving spouse license;
  2. A holder of an apprentice license;
  3. A holder of a courtesy card license; or
  4. An individual who is not licensed by the Board as a mortician, funeral director, or surviving spouse license holder.

10.29.06.10 Prohibitions

A. The Following Individuals may not Enter into a Preneed Contract with a Buyer:

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  1. The owner or director of a corporation license issued by the Board who is not also a licensed mortician, funeral director, or holder of a surviving spouse license;
  2. A holder of an apprentice license;
  3. A holder of a courtesy card license; or
  4. An individual who is not licensed by the Board as a mortician, funeral director, or surviving spouse license holder.

10.29.06.10 Prohibitions

B. The Following Individuals may not Advertise that they Provide Preneed Contracts: