7735-7746

BUSINESS AND PROFESSIONS CODE
SECTION 7735-7746




7735.  No funeral establishment licensed under the laws of the State
of California, or the agents or employees of a funeral
establishment, shall enter into or solicit any preneed arrangement,
contract, or plan, hereinafter referred to as "contract," requiring
the payment to the licensee of money or the delivery to the licensee
of securities to pay for the final disposition of human remains or
for funeral services or for the furnishing of personal property or
funeral merchandise, wherein the use or delivery of those services,
property or merchandise is not immediately required, unless the
contract requires that all money paid directly or indirectly and all
securities delivered under that agreement or under any agreement
collateral thereto, shall be held in trust for the purpose for which
it was paid or delivered until the contract is fulfilled according to
its terms; provided, however, that any payment made or securities
deposited pursuant to this article shall be released upon the death
of the person for whose benefit the trust was established as provided
in Section 7737. The income from the trust may be used to pay for a
reasonable annual fee for administering the trust, including a
trustee fee to be determined by the bureau, and to establish a
reserve of not to exceed 10 percent of the corpus of the trust as a
revocation fee in the event of cancellation on the part of the
beneficiary. The annual fee for trust administration may be recovered
by withdrawals from accumulated trust income, provided that total
withdrawals for this purpose shall not exceed the amount determined
by the bureau. In no case shall the total amount withdrawn in a year
for trust administration exceed the total amount of posted trust
income for the immediate 12 preceding months. In addition to annual
fees and reserves authorized by this section, a trustee may, at its
election, pay taxes on the earnings on any trust pursuant to Section
17760.5 of the Revenue and Taxation Code. In no event, however, shall
taxes paid on the earnings of any trust be considered part of the
fees or reserves authorized by this section. All remaining income
shall be accumulated in trust.
   None of the corpus of the trust shall be used for payment of any
commission nor shall any of the corpus of the trust be used for other
expenses of trust administration, or for the payment of taxes on the
earnings of the trust.



7735.5.  The preneed funeral arrangement contract shall clearly
state if benefits are unavailable or limited for any reason.



7736.  For the purposes of this article the term "trustee" shall
mean any banking institution or trust company legally authorized and
empowered by the State of California to act as trustee in the
handling of trust funds or not less than three persons one of whom
may be an employee of the funeral establishment; the word "trustor"
shall mean any person who pays the money or deposits the securities
used for those preneed arrangements; the term "beneficiary" shall be
the person for whom the funeral services are arranged; the words
"corpus of the trust" shall include all moneys paid and securities
delivered by the trustor pursuant to the provisions of the article.




7737.  All securities purchased by the trustor for deposit in trust
and all money received from the trustor for deposit in trust shall be
placed in trust with a trustee within 30 days of their receipt by
the funeral establishment pursuant to a trust agreement executed by
the funeral establishment, the trustor and trustee which shall
provide that the trustee shall hold the money or securities in trust
for the purposes for which deposited and that the trustee, upon the
signature of a majority of such trustees, shall deliver the corpus of
the trust to the funeral establishment upon the filing of a
certified copy of the death certificate or other satisfactory
evidence of the death of the beneficiary, together with satisfactory
evidence that the funeral establishment has furnished the merchandise
and services, provided, however, that (1) in the case of a trust
agreement between any of the trustees set forth in Section 7736 and a
recipient of public assistance, under the provisions of subdivision
(a) of Section 11158 or paragraph (1) of subdivision (e) of Section
12152 of the Welfare and Institutions Code, and provided the value
limitations of those sections are not exceeded, such trust agreement
may further provide that it is irrevocable, and (2) in all other
cases such trust agreement shall further provide that at any time
before the funeral establishment has furnished the merchandise and
services provided for in the contract the trustor or the legally
appointed representative may in writing demand and receive the return
of the corpus of the trust, together with any income accrued in the
trust, less the revocation fee provided for in Section 7735;
provided, however, that if and when the trustor becomes otherwise
eligible, or in order to become eligible, for public social services,
as provided in Division 9 (commencing with Section 10000) of the
Welfare and Institutions Code, he or she may agree, at his or her
option, that the trust shall be irrevocable in order to avail himself
or herself of the provisions of Section 11158 or Section 12152 of
the Welfare and Institutions Code. The delivery of the corpus of the
trust and the accumulated income to the funeral establishment
performing the services, trustor or beneficiary pursuant to the terms
of this article and the trust agreement herein referred to, shall
relieve the trustee of any further liabilities with regard to those
funds or income therefrom.



7737.3.  All commingled preneed trust funds held by a funeral
establishment shall be subject to an annual, independent certified
financial audit with a copy of the audit to be submitted to the
bureau for review within 120 days of the close of the fund's fiscal
year. Any findings of noncompliance with existing law regarding
preneed trust funds shall be identified by the auditor in a separate
report for review and action by the bureau. Audits and reports of
noncompliance shall be filed simultaneously.



7737.5.  A trustee may deposit the corpus of the trust in any
financial institution insured by the Federal Deposit Insurance
Corporation.


7737.7.  A trustee may deposit the corpus of the trust in any credit
union which is insured by the National Credit Union Share Insurance
Fund.


7738.  A licensed funeral establishment that is also a licensed
cemetery authority shall not deposit any money or securities received
in connection with preneed funeral arrangements in a special
endowment care fund as provided in Article 4 (commencing with Section
8775) of Chapter 5 of Part 3 of Division 8 of the Health and Safety
Code, nor shall a licensed funeral establishment permit the deposit
of any money or securities received in connection with a special
endowment care fund into a preneed funeral trust fund. Nothing in
this section shall require the liquidation or conversion of any
lawful investment existing on December 31, 1981.




7739.  Any person willfully violating the provisions of this article
or any of them shall be punishable either by imprisonment in the
county jail for a period not exceeding six months, or by fine not
exceeding five hundred dollars ($500), or by both imprisonment and
fine, or by imprisonment in the state prison for 16 months, or two or
three years. If the violator is a funeral establishment licensee, he
or she shall also be subject to disciplinary action as provided in
Article 6 (commencing with Section 7686).



7740.  The bureau is authorized to enforce of its own initiative the
provisions of this article and may adopt such rules and regulations
as in its opinion may be necessary to perform such duties and to
safeguard the trust funds subject to this chapter.



7740.5.  A funeral establishment shall pay to the bureau the fee
fixed by this chapter for filing with the bureau any report on
preneed trust funds required by rules and regulations of the bureau
adopted pursuant to Section 7740.


7741.  Nothing in this article shall apply to cemetery property;
cemetery commodities; cemetery service; or merchandise that is
delivered as soon as paid for.


7742.  Nothing in this article shall apply to any arrangement,
contract or plan for the issuance of securities now or hereafter
authorized under a permit of the Commissioner of Corporations of this
state.


7745.  Every funeral establishment shall present to the survivor of
the deceased who is handling the funeral arrangements or the
responsible party a copy of any preneed agreement which has been
signed and paid for in full, or in part by, or on behalf of the
deceased and is in the possession of the funeral establishment. The
copy may be presented in person, by certified mail, or by facsimile
transmission, as agreed upon by the survivor of the deceased or the
responsible party. A funeral establishment that knowingly fails to
present a preneed agreement to the survivor of the deceased or the
responsible party shall be liable for a civil fine equal to three
times the cost of the preneed agreement, or one thousand dollars
($1,000), whichever is greater.



7746.  (a) Notwithstanding any other provision of law, a funeral
establishment that is otherwise exempt from the requirement of filing
an annual preneed trust report or whose preneed trust funds are
reported in a combined preneed annual preneed trust report, shall
annually file a declaration of nonreporting status with the bureau.
   (b) The declaration shall be filed on or before May 1 of each year
and shall also be filed upon the transfer of ownership or the
cessation of business.
   (c) The declaration shall be filed on a form provided by the
bureau and shall include, but shall not be limited to, both of the
following:
   (1) The basis upon which the funeral establishment is exempt from
the annual trust reporting requirement.
   (2) The specific kind and nature of the exempt preneed
arrangements, if any, in which the funeral establishment engages.
   (d) The declaration shall be verified by the funeral establishment'
s owner, a partner, or in the case of a corporation, by the president
or vice president.