2023 Tennessee Code › Title 46 - CEMETERIES (§§ 46-1-101 — 46-8-103) › Chapter 1 - REGULATION OF CEMETERIES (§§ 46-1-101 — 46-1-313) › Part 2 - FINANCIAL MANAGEMENT (§§ 46-1-201 — 46-1-218) › Section 46-1-204 - Improvement care trust fund

(a)
(1)
Every cemetery company engaged in the business of selling, leasing, or renting lots, grave spaces, crypts, niches, and burial rights in this state shall establish and forever maintain an improvement care trust fund to provide for the improvement, care, and maintenance of the following:
(A)
Each separate cemetery;
(B)
Each separate geographical location of each cemetery owned and operated by the cemetery company; and
(C)
Each separate geographical location of a funeral home, or other individual or entity, that has niches or other areas or devices of interment for sale, lease, or rent.
(2)
The trust fund required by this subsection (a) shall be established by executing a written trust agreement with a trust company approved by the commissioner, or with a state or national bank, or with savings and loan associations having insurance of accounts as required by law; provided, that a cemetery company may change the trustee of its trust fund by providing written notice to the commissioner no later than thirty (30) days prior to the change, along with sufficient evidence, as determined by the commissioner, that the trustee will be able to comply with the requirements of this chapter. If the commissioner determines that the evidence submitted is insufficient to ensure that the trustee will be able to comply with the requirements of this chapter, the commissioner may refuse to allow the cemetery company to change the trustee.
(3)
(A)
As used in this subdivision (a)(3), "department" means the department of commerce and insurance.
(B)
The trustee for a trust established pursuant to this section may establish:
(i)
An improvement care trust fund for each cemetery; or
(ii)
A master improvement care trust fund to hold the funds for multiple cemetery companies based in this state. The master improvement care trust must identify the subaccounts for each individual participating cemetery company trust.
(C)
A trustee managing a trust established pursuant to this section shall:
(i)
Manage the trust in accordance with the Tennessee Uniform Prudent Investor Act of 2002, compiled in title 35, chapter 14; however, §
35-14-103(b)
does not apply to trusts, or trustees managing a trust, established pursuant to this subsection (a);
(ii)
Provide an annual financial report concerning the trust to the department in accordance with this chapter and rules promulgated pursuant to this chapter; and
(iii)
Make accounting records for the trust available to the comptroller of the treasury and the department, upon request, for review and audit.
(D)
If the trustee uses a board for the management of the trust established pursuant to subsection (a), then the trustee must maintain insurance on behalf of each board member against liability asserted against or incurred by the board member in that capacity.
(b)
The written trust agreement shall specifically state the following:
(1)
The nature and extent of care to be furnished;
(2)
That the care shall be furnished only to the extent that the net income derived from the amount deposited in the trust permits; and
(3)
(A)
That within thirty (30) days of a transaction, not less than the following minimum amounts will be set aside and deposited in trust by the cemetery company:
(i)
For land, but not including lawn crypts or land donated without charge for the purpose of interring the remains of a deceased person who was under eighteen (18) years of age at the time of death, one dollar ($1.00) per square foot of the land sold or twenty percent (20%) of the total transaction amount for the land, whichever is greater;
(ii)
For a lawn crypt, twenty percent (20%) of the total transaction amount for the land excluding the lawn crypt or fifty dollars ($50.00), whichever is greater;
(iii)
For a mausoleum, crypt, niche, or any memorial other than a commodity, not less than ten percent (10%) of the total transaction amount for each item;
(iv)
For the special care of any lot, grave, crypt, or niche or of a family mausoleum, memorial, marker or monument, the full amount received;
(v)
For a commodity, the full amount received for memorial care; and
(vi)
For the sale of land for non-cemetery purposes, the commissioner may order the cemetery company disposing of the land to deposit up to one hundred percent (100%) of the net proceeds of the disposition in the cemetery's improvement care trust fund or the cemetery's pre-need merchandise and services trust fund, or both, within thirty (30) days after the disposition, if there is a deficiency in either trust fund. The order may not exceed the actual amount of the deficiency in the improvement care trust fund or the pre-need merchandise and services trust fund, or both;
(B)
Notwithstanding anything in this chapter to the contrary, any cemetery company depositing more than the required amounts in its improvement care trust fund, in accordance with prior statutory requirements or its charter or contracts, shall be authorized to continue to do so; provided, that deliberate advance payments made to the improvement care fund shall not be credited toward any future liability, except that a cemetery company may credit any payment, which was deposited into the improvement care trust fund from a contract that was subsequently canceled, toward any future liability as long as the credit is applied within twelve (12) months from the date of the cancellation date.
(c)
Every cemetery company shall be permitted to charge a fee for the memorial care of every commodity installed in the cemetery. The fee shall not exceed twenty-three cents (23¢) per square inch of the ground covered by the commodity. At the end of each calendar year, the cemetery company shall be permitted to increase its fee for the memorial care of commodities by no more than the percentage representing the consumer price index at the end of that calendar year. The fee charged for memorial care of a commodity shall not exceed the fee charged by the cemetery company for installation of the commodity. The charge for memorial care of a commodity shall be the same to all, regardless of the source of the commodity.
(d)
The setting aside and deposit provided for in subdivision (b)(3)(A) shall be made by the cemetery company not later than thirty (30) days after the close of the month in which the final payment on the purchase price of each lot, grave space, crypt or niche, the final payment for the general or special care of the lot, grave space, crypt or niche, the final payment for the memorial care of a commodity, or the final payment of a family mausoleum, memorial, marker or monument is received. The amounts deposited shall be held by the trustee of the improvement care funds of the cemetery in trust and perpetuity for the specific purposes stated in the written agreement. All deposits with a trustee by a cemetery company under this part shall be in cash only.
(e)
(1)
As used in this subsection (e), unless the context otherwise requires:
(A)
"Net earnings" means:
(i)
All net income, excluding capital gains; or
(ii)
An amount not exceeding five percent (5%) of the fair market value of the trust, averaged over the lesser of the balance as of the last day of the trust fiscal year immediately preceding the distribution year and the two (2) preceding years or, if less than two (2) years, the period of time the trust has been in existence. If the earnings are part of a master improvement care trust, then only the fair market value of the cemetery company's portion of the trust must be used to calculate the cemetery company's net earnings. This amount is not reduced by taxes or fees, unless the fees exceed two and one-half percent (2.5%) of the market value of the trust as of the last day of the trust fiscal year immediately preceding the distribution year. If a fee exceeds two and one-half percent (2.5%) of the market value of the trust as of the last day of the preceding fiscal year, then the amount of the disbursement must be reduced by the excess; and
(B)
"Net income" means the collected dividends, interest and other income of the trust reduced by taxes on income and fees.
(2)
The net earnings of each improvement care trust fund shall be paid to and shall be used and expended by the owners or officers and directors of the cemetery company, or by the trustee of the improvement care trust fund while the cemetery is not being operated by its owner, for the improvement care, as defined in §
46-1-102
, of the cemetery or separate geographical location of the cemetery for which the fund was established and for no other purpose.
(3)
While a cemetery for which an improvement care trust has been funded is not being operated by its owner, the trustee may disburse net income from the trust to compensate any responsible person for work performed or expenses incurred in the improvement care of the cemetery. In investing these funds, the trustee shall exercise the judgment and care under the circumstances then prevailing that persons of prudence, discretion and intelligence exercise in the management of their own affairs, not in regard to speculation but in regard to the permanent disposition of their funds, considering the probable income and capital appreciation as well as the probable safety of their capital. Within the limitations of the standard in this subdivision (e)(3), subject to any express provisions of limitations contained in any particular trust instrument, the trustee is authorized to acquire every kind of property, real, personal or mixed, and every kind of investment, specifically including, but not limited to, corporate obligations of every kind, and stocks, preferred or common, that persons of prudence, discretion and intelligence acquire for their own accounts.
(4)
(A)
A cemetery owner may select a method to calculate the net earnings of a trust for the first fiscal year in which this subsection (e) is effective, by delivering written instructions to the trustee of the fund no later than sixty (60) days prior to the end of that fiscal year.
(B)
A cemetery owner may select a method of calculation to be used for any given fiscal year by using either subdivision (e)(1)(A)(i) or (e)(1)(A)(ii). A cemetery owner shall provide the trustee with written instructions of which method of calculation has been chosen no later than the last day of the preceding fiscal year. In the event that the method of calculation chosen by the cemetery owner prior to the start of the fiscal year would result in lower disbursements than would the other calculation, then the cemetery owner may provide the trustee with written instructions no later than sixty (60) days prior to the end of the fiscal year to change the method of calculation.
(C)
In the event that the trustee does not receive written instructions for a given fiscal year from the cemetery owner informing the trustee of the method of calculation chosen or the trustee has never received any written instructions of the method of calculation chosen, then the trustee shall calculate and disburse funds in accordance with subdivision (e)(1)(A)(i).
(D)
(i)
In order to withdraw up to five percent (5%) of a trust that is already in existence on July 1, 2009, in accordance with subdivision (e)(1)(A)(ii), the current market value of the trust after the withdrawal shall be greater than .90 x [MV(T)+C]. T represents July 1, 2009. MV represents the principal market value of the trust at T. C represents the total contributions made to the trust principal from T to the date that the method of calculation is selected.
(ii)
In order to withdraw up to five percent (5%) of a trust that is established after July 1, 2009, in accordance with subdivision (e)(1)(A)(ii), the current market value after the withdrawal shall be greater than .90 x [MV(N)+C]. MV(N) represents the principal market value of the trust that will be determined at the end of the trust's fiscal year. C represents contributions made to the principal after the first completed fiscal year.
(iii)
Disbursements from the trust that are calculated pursuant to subdivision (e)(1)(A)(ii) shall be made on a monthly, quarterly, semiannual or annual basis.
(E)
In order for a cemetery owner to receive distributions from the trust that are calculated by using either method of calculation in subdivision (e)(1)(A)(i) or (e)(1)(A)(ii), the cemetery owner shall:
(i)
Be current on payment of the annual registration fee. The cemetery owner shall certify to the trustee on forms provided by the commissioner that the cemetery is registered with the department; and
(ii)
Be current on required deposits to the trust or make payments on any arrearages through special arrangements with the commissioner. At the commissioner's discretion, the commissioner may allow cemetery owners to make payments on arrearages. The cemetery owner shall certify to the trustee on forms provided by the commissioner that the cemetery owner is current on required deposits or is making payments on arrearages.
(f)
No cemetery company shall commingle the improvement care funds for the benefit of one (1) cemetery with improvement care funds for the benefit of any other cemetery or with any other funds, and each separate geographical site of a cemetery shall have a separate improvement care fund. However, improvement care funds from more than one (1) cemetery may be commingled by trustees for investment purposes, so long as an accurate accounting is maintained for each individual fund.
(g)
The improvement care trust fund shall not be a part of the assets of any cemetery company operating under this part and the improvement care trust fund shall not be subject to the debts of the cemetery company.
(h)
For purposes of this section, "cemetery company" includes any individual or entity that leases or rents crypts and niches, even if the individual or entity is not organized, owning, or controlling cemetery lands or property nor conducting the business of a cemetery.
Amended by 2022 Tenn. Acts, ch. 705, s 2, eff. 1/1/2023.
Amended by 2022 Tenn. Acts, ch. 705, s 1, eff. 1/1/2023.
Amended by 2015 Tenn. Acts, ch. 288, Secs.s 4, s 5, s 6 eff. 1/1/2016.
Amended by 2015 Tenn. Acts, ch. 288, s 3, eff. 1/1/2016.
Acts 1927, ch. 75, § 1; mod. Code 1932, § 3923; Acts 1953, ch. 44, § 1; 1968, ch. 557, § 2; T.C.A. (orig. ed.), § 46-110; Acts 1976, ch. 773, § 7; 1978, ch. 605, § 1; 1978, ch. 708, § 6.04; T.C.A., §§ 46-210, 46-2-110; modified; Acts 1980, ch. 780, §§ 5-7; impl. am. Acts 1980, ch. 780, § 1; 1986, ch. 693, §§ 12-17; 1996, ch. 714, §§ 1, 2; 2005, ch. 217, § 1; T.C.A. §
46-2-302
; Acts 2006, ch. 1012, § 3; 2009 , ch. 356, §§ 3, 4.