By: Carriker S.B. No. 1323
A BILL TO BE ENTITLED
AN ACT
1-1 relating to prepaid funeral services or merchandise.
1-2 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-3 SECTION 1. Section 5, Chapter 512, Acts of the 54th
1-4 Legislature, Regular Session, 1955 (Article 548b, Vernon's Texas
1-5 Civil Statutes), is amended to read as follows:
1-6 Sec. 5. TRUST FUNDED PREPAID FUNERAL BENEFITS. (a) All sums
1-7 heretofore or hereafter paid or collected on contracts for prepaid
1-8 funeral benefits entered into prior to the effective date of this
1-9 Act shall be handled in accordance with the manner in which they
1-10 have heretofore been handled. All sums paid or collected on such
1-11 contracts entered into after the effective date of this Act (with
1-12 the exception of those paid where a contract of insurance
1-13 previously is created or approved by the Department) shall be
1-14 handled in the following manner:
1-15 (1) The seller of a trust-funded prepaid funeral
1-16 benefits contract <funeral home (or other entity collecting said
1-17 funds)> may retain as its own money, for the purpose of covering
1-18 its selling expenses, servicing costs, and general overhead, an
1-19 amount not to exceed one-half of all funds so collected or paid
1-20 until it has received for its use and benefit an amount not to
1-21 exceed ten percent of the total amount agreed to be paid by the
1-22 purchaser of said prepaid funeral benefits as such total amount is
1-23 reflected in the contract. No charges or assessments, except
2-1 premiums collected on an insurance policy guaranteeing the payments
2-2 on a prepaid funeral benefits contract or the unpaid balance
2-3 thereof, shall be collected from the purchaser other than those
2-4 included in the total amount of said contract.
2-5 (2) All amounts paid or collected, with the exception
2-6 of those permitted to be retained as set forth above, shall, within
2-7 30 <thirty> days after such collection, be (a) deposited in a
2-8 savings and loan association in this state in an interest-bearing
2-9 account insured by the federal government, or (b) deposited in a
2-10 state or national bank in this state in an interest-bearing account
2-11 insured by the federal government, or (c) placed with the trust
2-12 department in a state or national bank in this state, or in a trust
2-13 company authorized to do business in this state, to be invested by
2-14 such trust department or company in accordance with the terms and
2-15 provisions of this Act <the Texas Trust Code (Subtitle B, Title 9,
2-16 Property Code).> Such deposits or trust accounts shall be carried
2-17 in the name of the funeral provider <home> or other entity to whom
2-18 the purchaser makes payment, but accounting records shall be
2-19 maintained by the seller showing the amount deposited or invested
2-20 with respect to any particular purchaser's contract.
2-21 (3) On the death of a beneficiary named in a prepaid
2-22 funeral benefits contract, the seller, after completion of the
2-23 funeral service and presentation to the depository of proper
2-24 affidavits signed and sworn to by an officer or authorized agent of
2-25 the seller on forms prescribed by the Department and a certified
3-1 copy of the death certificate, may withdraw the amount equal to the
3-2 original contract amount paid in by the purchaser less amounts
3-3 retained under Subdivision (1) of this section, plus all earnings
3-4 attributable to that contract. The seller shall maintain the
3-5 copies of the affidavits and death certificate for examination by
3-6 the Department.
3-7 <The date of death of the purchaser of such contract (or
3-8 other individual who may be designated in the contract as the
3-9 person for whose funeral such funds may be used) shall be the
3-10 maturity date of the contract, and as soon as conveniently
3-11 practicable after such maturity date and upon presentation of a
3-12 certified copy of the death certificate of such person together
3-13 with proper affidavits as may be required by the Department, such
3-14 funds shall be released in fulfillment of the contract, and the
3-15 funeral home (or other entity to the contract which has collected
3-16 the funds) shall, if the amount so withdrawn does not equal one
3-17 hundred percent of the total amount paid by the purchaser, make up
3-18 the difference so that the amount available for funeral benefits
3-19 shall equal one hundred percent of the total amount paid by the
3-20 purchaser. Any amounts accumulated at maturity on any particular
3-21 contract in excess of one hundred percent of the amount deposited
3-22 or placed by the seller shall be available to the funeral home (or
3-23 other entity collecting said funds) in making up the difference on
3-24 any particular contract which at maturity did not have funds
3-25 available equal to one hundred percent of the amount paid by the
4-1 purchaser.>
4-2 (4) The seller may withdraw <at any time> funds out of
4-3 earnings <accrued interest or income> on the accounts for the
4-4 purpose of paying reasonable and necessary trustee's fees or
4-5 depository fees. With prior approval of the Department, the seller
4-6 may withdraw funds out of earnings on the accounts <charges made by
4-7 a savings and loan association, or bank, or trust department of a
4-8 bank, or trust company, and trustee's fees made by a savings and
4-9 loan association, or bank, or trust department of a bank, or trust
4-10 company, with respect to such accounts,> for the purpose of paying
4-11 any taxes<, with prior approval of the Department,> caused or
4-12 created by reason of the existence of such deposit accounts or
4-13 trust accounts or for the purpose of paying any assessment under
4-14 Section 8A of this Act<, or for the purpose of paying any
4-15 assessment under this Act or ordered by the Department for funding
4-16 a fund to guarantee performance of prepaid funeral contracts>.
4-17 The seller may also withdraw funds from the earnings <accrued
4-18 interest or income> on the deposit accounts for the purpose of
4-19 paying the examination fee for one examination by the Department
4-20 each calendar year, or for the preparation of financial statements
4-21 required by the Department, including financial statements required
4-22 in lieu of an examination by the Department.
4-23 Upon the maturity date of a trust-funded contract as above
4-24 provided and only after the funeral provider <home> has fully
4-25 performed its obligations under said contract with the purchaser,
5-1 or at the time of cancellation prior to maturity as provided in
5-2 Subsection (5) herein, the seller may <additionally> withdraw from
5-3 said deposit account all earnings attributable to <(whether a trust
5-4 or other funded account) any enhanced value, accrued interest, or
5-5 accrued income on> said contract. Such withdrawal shall be the
5-6 proportionate part of the earnings <total enhanced value, accrued
5-7 interest or accrued income,> that the amount deposited under said
5-8 contract bears to the total amount deposited from all unmatured
5-9 contracts, less any withdrawals of excess earnings made in
5-10 accordance with this subsection, or, if the Commissioner has
5-11 affirmatively determined that the records of the permit holder are
5-12 adequate to allow this method to be exercised in an accurate
5-13 manner, the withdrawals may be equal to the actual earnings on
5-14 individual matured contracts, minus any properly allocated expenses
5-15 permitted by this subsection, less any withdrawals of excess
5-16 earnings made in accordance with this subsection. <On application,
5-17 the Commissioner may, after notice and hearing conducted pursuant
5-18 to the Administrative Procedure and Texas Register Act (Article
5-19 6252-13a, Vernon's Texas Civil Statutes), authorize the seller of
5-20 preneed services to withdraw excess earnings from the trust
5-21 deposits. For the purposes of this section, "excess earnings"
5-22 means funds in the trust deposit that exceed 107 percent of the
5-23 seller's obligations on each contract for which deposits have been
5-24 made after the date the contracts are entered into. The
5-25 Commissioner may grant the authorization if, in the Commissioner's
6-1 opinion, the evidence shows that the seller's ability to deliver
6-2 the contracted services and merchandise is not diminished by the
6-3 withdrawal. The Commissioner by rule may set out factors that may
6-4 be considered in evaluating each application. The Commissioner's
6-5 decision on whether to grant the withdrawal is not limited to those
6-6 factors. A withdrawal of excess earnings made after an initial
6-7 withdrawal as provided by this subsection may not be approved for
6-8 more than 93 percent of the funds remaining in the accounts after
6-9 the withdrawal that are in excess of the 107 percent to be
6-10 maintained in satisfaction of the seller's contractual
6-11 obligations.>
6-12 (5) In the event a purchaser under a trust-funded
6-13 contract should desire to cancel the contract prior to maturity,
6-14 such cancellation may be accomplished by the purchaser <seller>
6-15 giving to the seller written <fifteen days> notice of cancellation
6-16 on forms prescribed by the Department <in writing to the
6-17 Department, signed by the purchaser>, and thereafter, the <upon
6-18 written authorization from the Department, such> seller within 30
6-19 days of receipt of the cancellation notice shall <may> withdraw and
6-20 pay to the purchaser the funds in such depository being held for
6-21 the purchaser's use and benefit; provided, however, such purchaser
6-22 shall be entitled to receive only the actual amounts paid in by him
6-23 less the amounts permitted to be retained as provided in
6-24 Subdivision <Subsection> (1) hereof. The seller shall maintain
6-25 copies of the cancellation forms for examination by the Department.
7-1 Purchaser or seller may make no partial cancellations or
7-2 withdrawals.
7-3 (6) A purchaser of a trust-funded contract who elects
7-4 to cancel the contract during the first year of the contract when
7-5 payments required under the contract are current is entitled to
7-6 receive 90 percent of the actual amounts paid in by the purchaser
7-7 or the amounts deposited in trust with respect to the purchaser's
7-8 contract, whichever is greater, regardless of the amount held in
7-9 trust. A purchaser of an insurance-funded contract who elects to
7-10 cancel the contract during the first year of the contract when
7-11 payments required under the contract are current is entitled to
7-12 receive the cash surrender value of the policy.
7-13 (b) If the purchaser cancels the contract on the
7-14 solicitation of the seller, the purchaser is entitled to withdraw
7-15 all funds paid to the seller and all earnings <enhanced value>
7-16 attributable to the funds. If the funds are used to purchase a new
7-17 prepaid <preneed> funeral contract pursuant to a solicitation by
7-18 the seller, the new contract must, as determined by the Department,
7-19 protect the purchaser to an extent equal to or greater than that
7-20 provided by the original contract, and the purchaser's cost of the
7-21 same or substantially the same services and merchandise may not be
7-22 increased above that contained in the canceled contract.
7-23 (c) The purchaser of a prepaid funeral benefits contract may
7-24 irrevocably waive and renounce the purchaser's right to cancel the
7-25 contract under Subsection (a)(5) of this section. The waiver and
8-1 renunciation may be included as a provision of the contract or be
8-2 made in a separate writing signed by the purchaser and the seller.
8-3 The waiver and renunciation of a purchaser's right to cancel the
8-4 purchaser's prepaid funeral benefits contract shall not affect:
8-5 (1) a right the purchaser has under the contract to
8-6 change the beneficiary of the contract;
8-7 (2) the purchaser's right to cancel the contract under
8-8 Section 4(g) of this Act upon any seizure of the seller's prepaid
8-9 funeral funds by the Commissioner; or
8-10 (3) any abandonment of the funds paid by the purchaser
8-11 under the contract in accordance with Section 5B of this Act.
8-12 (d) The purchaser of an insurance-funded prepaid funeral
8-13 benefits contract may irrevocably assign the purchaser's ownership
8-14 of and rights to benefits under the insurance policy or annuity
8-15 contract to the seller, the funeral provider, the trustee or other
8-16 person.
8-17 SECTION 2. The importance of this legislation and the
8-18 crowded condition of the calendars in both houses create an
8-19 emergency and an imperative public necessity that the
8-20 constitutional rule requiring bills to be read on three several
8-21 days in each house be suspended, and this rule is hereby suspended.