Restrictions on Use or Disposition of Funds Received in Connection with Pre-need Funeral Contracts

(1) Prohibition Against Personal or Business Uses. No Licensed Funeral Establishment, nor any agent or employee thereof, shall receive funds in connection with any Pre-need Funeral Contract for any personal use, payment of the operating expenses of any funeral establishment, issuance of a loan to any person, as collateral for any loan, or for any purpose. (2) Funeral Trust Account or Pre-need Insurance Policy or Annuity Required. All funds made payable to a banking institution or insurance company received from a Buyer by a Licensed Funeral Establishment, or by any employee or agent thereof, in connection with any Pre-need Funeral Contract shall be: (a) Deposited in a Funeral Trust Account which meets the requirements of 239 CMR 4.09 not later than five business days after the expiration of the "cooling-off" period described in 239 CMR 4.07(1); or (b) Paid to an insurance company for the purchase of a Pre-need Insurance Policy or Annuity pursuant to 239 CMR 4.10 not later than five business days after the expiration of the "cooling-off" period described in 239 CMR 4.07(1). (c) Each time a Licensed Funeral Establishment receives any funds made payable to a banking institution or insurance company in connection with any Pre-need Funeral Contract to which it is a party, that funeral establishment shall furnish the Buyer, and the Beneficiary (if different), with written confirmation that such funds have been deposited in a Funeral Trust Account or used to purchase a Pre-need Insurance Policy or Annuity, as required by this section, not later than 14 days after such funds are deposited or paid. Such written confirmation shall bear the signature of a duly-authorized representative of the banking institution in which the Funeral Trust Account has been established, or a duly-authorized representative of the insurance company which issued the Pre-need Insurance Policy or Annuity, whichever applies. (3) Reimbursement for Newly Imposed Taxes or Governmental Fees Permitted. Notwithstanding the provisions of 239 CMR 4.08(1), a Licensed Funeral Establishment may require a customer to reimburse said funeral establishment for any local, state or federal taxes or fees imposed after the execution of the Pre-need Funeral Contract, including but not limited to any value-added or sales taxes, for which the funeral establishment is held responsible by the taxing authority or governmental entity. In cases where the Pre-need Funeral Contract is funded in full or in part, said reimbursement shall be considered an additional sum to be paid by the customer, and the funeral establishment shall not be required to deduct it from any income which accrues on the amount initially placed with the funeral establishment for investment in a Pre-need Funeral Trust Account or Pre-need Insurance Policy or Annuity. (4) Access to Pre-need Funeral Contract Funds. Neither a Licensed Funeral Establishment, nor any agent or employee thereof, shall have access to any of the funds made payable to a banking institution or insurance company which are received by that funeral establishment in connection with any Pre-need Funeral Contract for any purpose other than: (a) Obtaining payment for the actual costs of Funeral Goods and/or Services provided to the Beneficiary, or for Non-funeral Establishment Charges or "Cash Advance Item" Charges connected with the funeral of that Beneficiary, upon presentation of the documentation required by 239 CMR 4.08(5); (b) Transferring those funds to another Funeral Trust Account, or to a Pre-need Insurance Policy or Annuity, upon written authorization to do so from the Buyer, the Beneficiary of the Pre-need Funeral Contract (if different from the Buyer), or the duly authorized legal representative of the Buyer or Beneficiary; (c) Transferring those funds to another Licensed Funeral Establishment in connection with a transfer of the underlying Pre-need Funeral Contract, pursuant to and in accordance with the requirements of 239 CMR 4.06; or (d) Refunding those funds to the Buyer or the Beneficiary upon receipt of a written notice of cancellation of the Pre-need Funeral Contract from the Buyer, the Beneficiary of the Pre-need Funeral Contract (if different from the Buyer) or the duly authorized legal representative of the Buyer or Beneficiary, to the extent permitted by 239 CMR 4.07. (5) Documentation Required for Payment for Services Rendered. Before obtaining or receiving payment for Funeral Goods and/or Services rendered to the Beneficiary of any Pre-need Funeral Contract pursuant to 239 CMR 4.08(4)(a), the Licensed Funeral Establishment shall present both of the following to the named Trustee of the Funeral Trust Account, or the duly authorized representative of the insurer which issued the Pre-need Insurance Policy or Annuity, which was used to fund that Pre-need Funeral Contract: (a) a certified copy of the death certificate for the Beneficiary; and (b) a written statement, signed by a Type 3, certifying that the Pre-need Funeral Contract has been performed in full. (6) Allocation and Disposition of Pre-need Funeral Contract Funds. At the time of the contract Beneficiary's death, the funds available in any Funeral Trust Account established in connection with that Pre-need Funeral Contract pursuant to 239 CMR 4.09, and/or in any Pre-need insurance policies purchased in connection with that Pre-need Funeral Contract pursuant to 239 CMR 4.10, shall be apportioned between the cost of the goods and services provided directly by the Licensed Funeral Establishment and the cost of the goods and services provided by vendors other than the Licensed Funeral Establishment (the Non-Funeral Establishment Charges or "Cash Advance Item" Charges) in accordance with the percentages calculated pursuant to 239 CMR 4.02(5)(d). (a) If the Pre-need Funeral Contract contained cost-protection provisions pertaining to the costs of the goods and services provided directly by the Licensed Funeral Establishment, and the amount of funds to be applied to the costs of those goods and services pursuant to this section exceeds the actual cost of those goods and services at the time of the contract Beneficiary's death, the Licensed Funeral Establishment may retain the resulting surplus funds. (b) If the Pre-need Funeral Contract contained cost-protection provisions pertaining to the costs of the goods and services provided directly by the Licensed Funeral Establishment, and the amount of funds to be applied to the costs of those goods and services pursuant to 239 CMR 4.08(6) is not sufficient to cover the actual cost of those goods and services at the time of the contract Beneficiary's death, the Licensed Funeral Establishment shall bear the resulting loss and shall not bill the estate of the contract Beneficiary, or any other person, for the deficiency. (c) If the Pre-need Funeral Contract contained cost-protection provisions pertaining to the costs of the goods and services provided by vendors other than the Licensed Funeral Establishment, and the amount of funds to be applied to the costs of those goods and services pursuant to 239 CMR 4.08(6) exceeds the actual cost of those goods and services at the time of the contract Beneficiary's death, the Licensed Funeral Establishment may retain the resulting surplus funds. (d) If the Pre-need Funeral Contract contained cost-protection provisions pertaining to the costs of the goods and services provided by vendors other than the Licensed Funeral Establishment, and the amount of funds to be applied to the costs of those goods and services pursuant to 239 CMR 4.08(6) is not sufficient to cover the actual cost of those goods and services at the time of the contract Beneficiary's death, the Licensed Funeral Establishment shall bear the resulting loss and shall not bill the estate of the contract Beneficiary, or any other person, for the deficiency. (e) If the Pre-need Funeral Contract did not contain cost-protection provisions pertaining to the costs of the goods and services provided directly by the Licensed Funeral Establishment, and the amount of funds to be applied to the costs of those goods and services pursuant to 239 CMR 4.08(6) exceeds the actual cost of those goods and services at the time of the contract Beneficiary's death, the Licensed Funeral Establishment shall refund the resulting surplus to the estate of the contract Beneficiary. In such event, the amount refunded may be subject to claims of the Commonwealth or the United States. (f) If the Pre-need Funeral Contract did not contain cost-protection provisions pertaining to the costs of the goods and services provided directly by the Licensed Funeral Establishment, and the amount of funds to be applied to the costs of those goods and services pursuant to 239 CMR 4.08(6) is not sufficient to cover the actual cost of those goods and services at the time of the contract Beneficiary's death, the Licensed Funeral Establishment may bill the estate of the contract Beneficiary for the deficiency. (g) If the Pre-need Funeral Contract did not contain cost-protection provisions pertaining to the costs of the goods and services provided by vendors other than the Licensed Funeral Establishment, and the amount of funds to be applied to the costs of those goods and services pursuant to 239 CMR 4.08(6) exceeds the actual cost of those goods and services at the time of the contract Beneficiary's death, the Licensed Funeral Establishment shall refund the resulting surplus to the estate of the contract Beneficiary. In such event, the amount refunded may be subject to claims of the Commonwealth or the United States. (h) If the Pre-need Funeral Contract did not contain cost-protection provisions pertaining to the costs of the goods and services provided by vendors other than the Licensed Funeral Establishment, and the amount of funds to be applied to the costs of those goods and services pursuant to 239 CMR 4.08(6) is not sufficient to cover the actual cost of those goods and services at the time of the contract Beneficiary's death, the Licensed Funeral Establishment may bill the estate of the contract Beneficiary for the deficiency. (7) Final Statement of Allocation of Funds to Be Furnished to Beneficiary's Estate in Certain Cases. If a Pre-need Funeral Contract is not a Cost-protected Pre-need Funeral Contract with respect to all of the funeral goods and services identified in that contract, the Licensed Funeral Establishment shall prepare, and furnish to the estate of the contract Beneficiary at the time of the contract Beneficiary's death, an addendum to the written Itemized Statement of Funeral Goods and Services required by 16 CFR Part 453 and M.G.L. c. 112, § 84B which shows: (a) The total amount of funds in the Pre-need Funeral Trust Account(s) and/or Pre-need insurance policies for that Beneficiary which were available at the time of the contract Beneficiary's death; (b) The amount of funds available in the Pre-need Funeral Trust Account(s) and/or Pre-need insurance policies which was applied to the costs of the goods and services which were provided directly by the Licensed Funeral Establishment itself; and (c) The amount of funds available in the Pre-need Funeral Trust Account(s) and/or Pre-need insurance policies which was applied to the costs of the goods and services provided by vendors other than the Licensed Funeral Establishment (the Non-funeral Establishment Charges or "Cash Advance Item" Charges). (d) Failure to provide such information accurately and completely in writing to the estate of the contract Beneficiary shall constitute a violation of 239 CMR 4.00.