2006 Code of Virginia § 54.1-2820 - Requirements of preneed funeral contracts

54.1-2820. Requirements of preneed funeral contracts.

A. It shall be unlawful for any person residing or doing business within thisCommonwealth, to make, either directly or indirectly by any means, a preneedfuneral contract unless the contract:

1. Is made on forms prescribed by the Board and is written in clear,understandable language and printed in easy-to-read type, size and style;

2. Identifies the seller, seller's license number and contract buyer and theperson for whom the contract is purchased if other than the contract buyer;

3. Contains a complete description of the supplies or services purchased;

4. Clearly discloses whether the price of the supplies and services purchasedis guaranteed;

5. States if funds are required to be trusted pursuant to 54.1-2822, theamount to be trusted, the name of the trustee, the disposition of theinterest, the fees, expenses and taxes which may be deducted from theinterest and a statement of the buyer's responsibility for taxes owed on theinterest;

6. Contains the name, address and telephone number of the Board and lists theBoard as the regulatory agency which handles consumer complaints;

7. Provides that any person who makes payment under the contract mayterminate the agreement at any time prior to the furnishing of the servicesor supplies contracted for except as provided pursuant to subsection B; ifthe purchaser terminates the contract within 30 days of execution, thepurchaser shall be refunded all consideration paid or delivered, togetherwith any interest or income accrued thereon; if the purchaser terminates thecontract after 30 days, the purchaser shall be refunded any amounts requiredto be deposited under 54.1-2822, together with any interest or incomeaccrued thereon;

8. Provides that if the particular supplies and services specified in thecontract are unavailable at the time of delivery, the seller shall berequired to furnish supplies and services similar in style and at least equalin quality of material and workmanship and the representative of the deceasedshall have the right to choose the supplies or services to be substituted;

9. Discloses any penalties or restrictions, including but not limited togeographic restrictions or the inability of the provider to perform, on thedelivery of merchandise, services or prearrangement guarantee; and

10. Complies with all disclosure requirements imposed by the Board.

If the contract seller will not be furnishing the supplies and services tothe purchaser, the contract seller must attach to the preneed funeralcontract a copy of the seller's agreement with the provider.

B. Subject to the requirements of 54.1-2822, a preneed funeral contract mayprovide for an irrevocable trust or an amount in an irrevocable trust that isspecifically identified as available exclusively for funeral or burialexpenses, where:

1. A person irrevocably contracts for funeral goods and services, such personfunds the contract by prepaying for the goods and services, and the funeralprovider residing or doing business within the Commonwealth subsequentlyplaces the funds in a trust; or

2. A person establishes an irrevocable trust naming the funeral provider asthe beneficiary; however, such person shall have the right to change thebeneficiary to another funeral provider pursuant to 54.1-2822.

C. If a life insurance or annuity contract is used to fund the preneedfuneral contract, the life insurance or annuity contract shall provide eitherthat the face value thereof shall be adjusted annually by a factor equal tothe Consumer Price Index as published by the Office of Management and Budgetof the United States, or a benefit payable at death under such contract thatwill equal or exceed the sum of all premiums paid for such contract plusinterest or dividends, which for the first 15 years shall be compoundedannually at a rate of at least five percent. In any event, interest ordividends shall continue to be paid after 15 years. In addition, thefollowing must also be disclosed as prescribed by the Board:

1. The fact that a life insurance policy or annuity contract is involved orbeing used to fund the preneed contract;

2. The nature of the relationship among the soliciting agent, the provider ofthe supplies or services, the prearranger and the insurer;

3. The relationship of the life insurance policy or annuity contract to thefunding of the preneed contract and the nature and existence of anyguarantees relating to the preneed contract; and

4. The impact on the preneed contract of (i) any changes in the lifeinsurance policy or annuity contract including but not limited to changes inthe assignment, beneficiary designation or use of the proceeds, (ii) anypenalties to be incurred by the policyholder as a result of failure to makepremium payments, (iii) any penalties to be incurred or moneys to be receivedas a result of cancellation or surrender of the life insurance policy orannuity contract, and (iv) all relevant information concerning what occursand whether any entitlements or obligations arise if there is a differencebetween the proceeds of the life insurance policy or annuity contract and theamount actually needed to fund the preneed contract.

D. When the consideration consists in whole or in part of any real estate,the contract shall be recorded as an attachment to the deed whereby such realestate is conveyed, and the deed shall be recorded in the clerk's office ofthe circuit court of the city or county in which the real estate beingconveyed is located.

E. If any funeral supplies are sold and delivered prior to the death of thesubject for whom they are provided, and the seller or any legal entity inwhich he or a member of his family has an interest thereafter stores thesesupplies, the risk of loss or damage shall be upon the seller during suchperiod of storage.

(1989, c. 684; 1991, c. 721; 1992, c. 635; 1998, c. 738; 1999, c. 819; 2003,cc. 663, 673.)