Request By:
Mr. James F. Ogden
400 First National Bank Building
Sixth and Madison Avenue
Covington, Kentucky 41011
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Susan N. Mastin, Assistant Attorney General
This letter is written in response to your request for an Attorney General's Opinion regarding Kentucky cemetery law located at KRS 307.100 through KRS 307.991. Cemetery companies are required to establish and operate a perpetual care and maintenance trust fund account pursuant to KRS 307.130. The law states in KRS 307.130(1):
No cemetery company shall establish, or operate if already established, a cemetery unless it shall first provide for the future care and maintenance of such cemetery, and to accomplish this purpose shall cause to be established in a bank authorized by law to administer trust funds an irrevocable trust fund to be known as a perpetual care and maintenance fund. The income of such funds shall be used solely for the general care, maintenance, and embellishment of the cemetery.
The specific percentages of the gross selling price for each grave space, crypt, mausoleum crypt, and niche sold which must be placed into the perpetual care and maintenance fund is designated in subsection 2 of KRS 307.130. Your letter states that for many years, Evergreen Cemetery has placed amounts in excess of the required statutory amount for their perpetual care and maintenance fund. You asked three separate questions which will be addressed separately.
Your first question is, "May the cemetery stop placing money in the trust fund until such time as the amount therein has been reduced to the required statutory amount?" KRS 307.130(2)(a) designates the amounts which shall be put into the perpetual care and maintenance fund and specifically states: "Every cemetery company shall place the following amounts into the perpetual care and maintenance fund within forty-five days of receipt of the final payment of each sale which occurs or contract of sale entered into after June, 1976." (Emphasis added.) KRS 307.130(2)(c) allows the cemetery company to credit the required payment against the initial deposit. Therefore, it is conceivable when a cemetery has a surplus in their fund, they could credit the required payments of KRS 307.130 against this surplus if the company could document the surplus and the credits sufficiently. However, it must be remembered that KRS 307.130(2)(a) is mandatory and there is no exception to this mandatory requirement when a cemetery has placed a surplus into their perpetual care and maintenance fund. It is our opinion that even though a surplus exists, the cemetery company would be required within forty-five days of receipt of the final payment of each sale to place the required amount into the perpetual care and maintenance fund unless the cemetery had prior approval from the Department of Banking and Securities and the trustee to credit the required payments against the surplus. Thereofre, a cemetery may not stop placing money in the trust fund as required by KRS 307.130 until such time as the amount in the trust fund is reduced to the required statutory amount unless they have first submitted proof of the surplus to the Department of Banking and Securities and the trustee and received prior approval from both. It seems the approval would have to be specific and contain the amount of money which could be credited.
Secondly, you asked, "May the cemetery transfer the fund to a different trustee?" There is no provision in the Kentucky Cemetery Law which governs the transfer of the perpetual care and maintenance fund to different trustees. The only requirement is that the trust fund be established and operated with a bank authorized by law to administer trust funds. There is nothing which would prohibit the cemetery company from transferring the perpetual care and maintenance fund to a different trustee, as long as the new trustee was a bank authorized by law to administer trust funds. Also, the cemetery company would have to submit proof to the Department of Banking and Securities as to the new trustee by sending a copy of the trust agreement, as well as complying with the other current regulations enacted by the Department of Banking and Securities.
Your third question is, "May the cemetery immediately remove from the fund the excess beyond the required statutory amount?" Again, there is nothing in the statutes which regulates removal of amounts in excess placed into the perpetual care and maintenance fund. The irrevocable trust established by statute contains only those funds deposited as required by the law. Therefore, removal of amounts deposited in excess of the statutory requirements would not disturb the irrevocable trust. It is our opinion that if amounts in excess of the required statutory amount found in KRS 307.130 have been placed into the perpetual care and maintenance fund, the cemetery company would have the authority to request the removal of such excess upon submitting substantial proof of the existence of the excess to both the trustee and the Department of Banking and Securities. After reviewing the request and the submitted proof, it would be a determination for the trustee and the Department of Banking and Securities the amount in excess which could be removed from the trust fund account. The cemetery company could be in compliance with KRS 307.130 and remove the surplus amounts from the fund, once it is proven that the amount is in fact in excess and the approval of the trustee and the Department of Banking and Securities is given.