California Code of Regulations › Title 16 - Professional and Vocational Regulations › Division 23 - Cemetery and Funeral Bureau › Article 3.5 - Endowment Care Fund Unitrust Distribution › Section 2334 - Unitrust Conversion Application

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) A cemetery authority, its board of
				trustees, or its corporate trustee seeking to convert the cemetery authority's
				endowment care fund from a net income distribution method to a unitrust
				distribution method shall submit to the bureau a completed form 23-UCA (rev.
				1/22), Unitrust Conversion Application, which is hereby incorporated by
				reference. Each application shall be accompanied by:
(1) The proposed endowment care fund trust
				instrument executed by the board of directors or limited liability company
				members of the cemetery authority;
(2) The trustee compensation schedule as
				referenced in Section
				8726.2(b)(7)(B)
				of the Health and Safety Code;
(3)
				Written investment objectives that promote the mutual goals set forth in
				Section
				8726.2(b)(1)
				of the Health and Safety Code;
(4)
				Evidence of how the cemetery authority, its board of trustees, or its corporate
				trustee will invest and manage the trust under the prudent investor rule as set
				forth in the Uniform Prudent Investor Act. Evidence shall be in the form of an
				analysis and shall include:
A. Current
				investment asset class allocation ranges, with explanations of the role(s) each
				class of investment plays in the overall portfolio strategy, and how the asset
				allocation will assist the trustee in managing the fund according to the
				prudent investor rule.
B. A five
				(5) year projection for the fund, by year, of anticipated income, expense, and
				valuation calculations adjusted for inflation and changes in asset values that
				identify and consider the following:
i. The
				projected value of the endowment care fund necessary to maintain the cemetery
				when it no longer has any interment space left to sell, if that condition is
				expected to occur before the end of the five (5) year projection.
ii. The reasonable administrative expenses
				attributable to generating income to the endowment care fund. "Reasonable
				administrative expenses" are the expenses identified in Section
				8733
				of the Health and Safety Code.
iii.
				The portion of expenses attributable to care, maintenance and embellishment of
				the cemetery expected to be paid by the endowment care fund.
iv. The projected contributions to the corpus
				from:
(1) sales of developed property
				categorized by quantity and type of interment space, including current deposit
				rates and any anticipated modification of the deposit rates; and
(2) sales of undeveloped property, if known
				and applicable.
v. The
				projected growth of the fund, with consideration of tax obligations.
vi. The projected annual unitrust
				amount.
(5)
				Policies or written procedures that identify any internal controls and
				reporting systems used by the trustee to manage the fund under the prudent
				investor rule.
(6) Written
				financial records showing a separately identifiable reserve account has been
				created for future maintenance, repair, restoration of property, or
				embellishments in the cemetery pursuant to Section
				8726.2(b)(5)
				of the Health and Safety Code. The beginning balance of this reserve may
				include the prior year's ending balance of the Reserve for Future Maintenance
				under the net income distribution method.