Pre-Grave Robbing

I suppose that this is what I get for having free time and watching local news, but last night this report caught my eye. However, my attention was dragged toward the closure of the Ted Foster & Sons funeral home — not because of the story’s touching emotional appeal or the horrendous nature of the actions taken by all those involved, but because of this one last bit:

Authorities say, by law, money collected for pre-arranged funeral plans has to go into a trust. […] Other homes should gladly accept the business.

A trust, you say? By law? Because of my infatuation with a certain HBO series (with the best ending you’ll ever see on television) I was already vaguely familiar with the concept of pre-need funerals, and was sure that the law cited in the report probably had some form of corruption that would make the lives of Mr. Foster’s customer’s worse.

And guess what? There is!

According to RSMO section 436-021, funds accepted from the sale of a pre-need funeral service must be placed into a trust, which (in the event of the closure of the original establishment of sale) can be transferred elsewhere, as stated in the report.

What wasn’t mentioned, though, was that funeral directors in Missouri, according to section 436-027, can retain up to 20 percent of the initial payment for the ceremony, regardless of circumstances. Thus, for every $5,000 funeral that Mr. Foster sold before he went out of business, he can legally keep $1,000 — no questions asked. This provision was likely included in order to assist funeral homes in maintaining facilities for a rush of business that they cannot  reasonably plan for, but it also allows the proprietors of failed businesses to run away to Mexico with the funds that families set aside to make a terrible time less difficult for their loved ones.

Surprisingly enough, the General Assembly has a pair of bills that have already been proposed this session, attempting to correct this problem. However, as described quite well in this analysis, certain consumer advocates feel that the bills themselves are still not doing enough to protect the final wishes of many funeral home customers.

The pre-need funeral is an aberration in the marketplace, as it is the one product that you know you’ll need, but also (presumably) the one that you can in no way predict the timing of. As such, it differs from insurance and other preventative investments not only because of the associated emotional weight, but also because of its unusual economic certainty. Because pre-need funerals are so unique, they require a unique amount of consumer protection to be provided by the state government itself.

While we advocate free-market solutions here at the Show-Me Institute that shy away from extensive government interference, I don’t think anyone can reasonably claim that a market with a definite and defined end is truly free, and I hope stronger legislation can be put in place to protect consumers of these unique services.