Pre-paid Funeral ‘Servicing’ Fee

Tuesday, January 09, 2007

Not every product is as fun to shop for as new computers or iPod phones. When you have to buy funeral expenses, the pain and grief surrounding the transaction overpowers the impulse to get a “good deal.” This is why millions of Americans purchase burial or funeral expenses ahead of time.

So imagine the surprise if you had pre-paid in full for all these expenses, only to be told that you had to come up with an additional $4,000 “policy servicing fee” before you could bury your loved one. That’s what happened to 13,000 residents of Tennessee, who were ripped off by a crooked ring of funeral homes and cemeteries run by Clayton Smart. Some of the victims had bought their plans several decades ago, only to be told the company would not honor their contracts unless they paid the new fee.

Smart offered a less-than-compelling explanation for why he had decided not to honor his pre-paid contracts: “inflation has struck.”

In reality, according to the accusations and five class-action lawsuits filed against him, Smart had looted the funeral trust funds and squandered the money on Cayman Islands investments, gas and oil speculation businesses, and a private jet.

Over $40 million in cemetery trust fund funds in Tennessee, and another $63 million from 28 Michigan cemeteries, may have been siphoned off.

The state of Michigan has taken over operation of the 28 cemeteries Smart owned in the state. In Tennessee, the Department of Commerce and Insurance and the Board of Funeral Directors and Embalmers are each holding hearings over the next two months to determine what Smart did with the missing funds.

Many states have special regulatory agencies for funeral homes and cemeteries. In California, it’s called the Cemetery and Funeral Bureau, and they have informative fact sheets for “consumers” of these products.

The main funeral consumer watchdog group is the Funeral Consumer’s Alliance, which has a consumer’s guide to funerals.

The Federal Trade Commission (FTC) enforces the “Funeral Rule,” which mandates that, among other things, a funeral director can’t charge you a fee to handle a casket you bought from another merchant. The FTC has its own consumer’s guide.

You can find a local nonprofit funeral consumer group through this link.

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