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These guidelines are advisory in nature and set out general concepts rather than precise statutory language. The ICCFA is not recommending that the guidelines be codified into law as a whole. Instead, the guidelines are intended for consideration as a series of options to be selectively chosen by interested parties to address particular concerns.
Developed in 1998 by the Government and Legal Affairs Task Force of the
International Cemetery and Funeral Association
In lieu of establishing a prepaid contract fund, alternative means to assure the seller's performance can be secured by the seller through a.) a performance bond, b.) an irrevocable letter of credit, or c.) a certificate of deposit for the wholesale liability of the merchandise and services to be provided.
High trust deposit requirements can unnecessarily restrict the sale of merchandise and services on a preneed basis. Alternative financial instruments in lieu of trusts can be used for avoiding these anti-competitive consequences while providing a resource to protect the purchaser in the event of the seller's default.
In addition to providing the purchaser and the regulatory authority with a similar level of security as that obtained by placing the funds in trust, there are numerous advantages to these alternative methods because they avoid the administrative expenses and paperwork created by trusts. These alternate vehicles offer assurance of performance without concern over adequate investment growth of a trust fund or the potential for deficiencies created by inappropriate investments or misuse of the trust funds.
Reporting procedures are streamlined with these alternatives, since there are no trust accounts to maintain, and no need to issue 1099s or K-1s to the purchasers for interest earned on the trust deposits. The legal obligation of having to pay tax on the trust earnings is eliminated. When the seller is permitted to recover up-front expenses associated with the sale, proceeds that are not available with high trusting requirements, the seller has more flexibility to use the funds received for productive business purposes. For example, the seller will be enabled to make capital improvements to the cemetery or funeral home, to purchase merchandise from the manufacturer in advance of need, or to recruit and retain specialized and skilled personnel.
Other alternatives to trusting, such as constructive delivery and insurance-funded prearrangements, are reviewed under separate guidelines.