States Impose Shift in Regulation of Endowment Care Trust Funds for Public Cemeteries

Cemeteries utilize an endowment care trust fund in order to cover maintenance costs of their land and facilities. Traditionally, cemeteries can withdraw any income earned, while the principal, which consists of profits from the sale of plots, crypts and other merchandise, along with capital gains through the sale of trust funds, must remain within the trust.

Public cemeteries often withdraw their entire income earned, which leads to funding issues for maintenance over time. When income earned is withdrawn from the trust, earnings remain relatively stagnant each year as they are based solely on principal, which only marginally increases through capital gains. As inflation raises operating costs, income earned on principal alone is unable to keep up.

Now, cemetery bureaus across many states are changing the fundamental purpose of endowment care trust funds. States want these trust funds to be able to adequately fund cemetery operations in perpetuity, rather than merely subsidize current operations. In order to achieve this, states are imposing new restrictions that would limit the amount of earnings that can be withdrawn, thus allowing the principle to actually grow. In turn, the value of the trust will increase, offsetting some of the effects of inflation. However, decreasing withdrawal amounts alone may not be enough to fund future operations. States are now asking cemeteries to voluntarily increase their contributions to endowment care trust funds beyond the amount required by law. The extent of these proposed measures varies among states.

These new provisions can have adverse effects on cemetery profits as they restrict distributions of earnings that are needed for daily cemetery operation.