Maryland funeral contract and prepaid-plan rights

When a Maryland licensee makes funeral arrangements, it must give the person who requested them a contract with an itemized list of all services and merchandise to be provided and the total price, a specification, as far as possible, of items the licensee will pay for on the buyer’s behalf, and the terms and method of payment. The contract is made in duplicate and signed by the licensee and the payor, and a signed copy is given to the payor when the arrangements are finalized. Any change in the arrangements must be set out in a similar written statement. Ask for your signed copy before you leave. [1]

In Maryland, only a licensed mortician, a licensed funeral director or the holder of a surviving spouse license may offer services or merchandise under a funeral pre-need contract; licensed staff may sign on behalf of the funeral establishment that employs them. Within 10 days after each payment, the seller must deposit into an interest-bearing escrow or trust account 100% of payments for services, an amount equal to 80% of the selling price of a casket or casket vault, and 100% of payments for all other goods. The account must be at a federally insured bank or savings and loan association, is set up in the buyer’s name, and is not an asset of the licensee or the funeral establishment. Interest earned before the services are provided belongs to the buyer, who must receive a statement at least once a year. Ask for that annual statement. [2]

A funeral pre-need contract ends, and the seller must refund to the buyer all payments and interest held for the buyer, if the buyer demands a refund in writing, the seller’s business is discontinued or sold, the seller is unable to perform, or the buyer does not pay the entire price before the beneficiary’s death and the seller treats the contract as void. Ask the seller to explain in writing how a refund would be calculated, including for any casket or casket vault. [2]

A buyer may choose, at any time, to place all or part of the payments in an irrevocable trust, but only to become eligible for Social Security or other benefits limited to people with limited assets. The trust document must state in bold type that the buyer may not receive a refund of any payments made. A funeral pre-need contract funded by a life insurance policy or annuity is not subject to the deposit, refund or irrevocable-trust rules described above. Ask whether your plan is trust-funded or insurance-funded before you sign. [2]

If pre-need money is taken by theft, embezzlement, false pretenses or forgery, or through fraud or misrepresentation, in a Maryland pre-need transaction by a licensed mortician, funeral director, apprentice or an unlicensed employee of a licensed funeral establishment, the buyer may claim compensation from the Family Security Trust Fund for an actual loss that occurred on or after January 1, 2010. Recovery cannot exceed the actual monetary loss. Each funeral establishment sales contract must tell the buyer that a claim may be filed with the Fund. Look for that notice in your contract. [3]

Cemetery pre-need contracts follow separate rules, which do not apply to the sale of burial space itself, and contracts funded by life insurance or an annuity are outside the trust and cancellation sections. For a covered contract, the seller must put the second 50% of the price in trust as payments come in and, within 30 days after the last payment, bring the trust balance to 55% of the total price; 80% of the selling price of any casket or casket vault must also go into trust. Some goods and services delivered or performed within 120 days are excluded. Ask what share of each payment the cemetery will place in trust. [4][5]

A cemetery pre-need buyer who permanently moves more than 75 miles from the cemetery named in the contract may cancel as to goods not yet delivered and services not yet performed by giving the seller written notice, under oath, of the move and the new permanent address. The trustee then pays the buyer the remaining specific funds, with accrued interest and a prorated share of realized capital gains. Separately, a buyer may cancel a casket or casket vault purchase by written notice any time before it is needed, and must receive a refund of 100% of the money paid for it. Ask for these cancellation terms in writing. [6]