The Preneed Bank Trust in Wisconsin: A Dinosaur That Needs to Go Extinct -Michael D. Sharkey, Esq., CFSP

Before I did my apprenticeship and went to mortuary school I trained to be a biologist. I was particularly interested in natural selection and the manner and methods by which any given species would evolve into existence, thrive, maintain, decline, or go extinct. Just as species evolve and fill a niche, a particular environmental condition in which the species thrives, they also fall out of favor when those conditions change. One thing that the study of biology and geology teaches is that conditions always change after the passage of enough time, and new species rise to fill new niches while others go extinct in those changed conditions. There is a lesson to be learned in that, and this article discusses how that lesson should be applied to traditional preneed bank trusts.

Fast forward from those days as a biology student to the present day. As General Counsel to the WFDA, I am normally excited to answer the phone from the members of WFDA. Troubleshooting the many problems that come up for Wisconsin funeral directors and finding solutions for them truly brings me happiness.

There is one exception to this and one call I do not enjoy: Hearing about problems with a preneed bank trust. It is a dinosaur that has outlived its niche due to changes in conditions. The traditional preneed bank trust is a creature that, because of changes to the nature of banking itself, is relegated to the fossil record. The modern banking environment is nothing like it was just a mere 20 years ago.

At just about every one of the last ten or so WFDA Conventions I have discussed, even cajoled, our members to move away from the traditional preneed bank trust. The time for this antiquated dinosaur to finally go extinct is here. The year is 2022 and preneed bank trusts need to go the way of embalming with arsenic.

The days of the “home town” bank have all but disappeared. Local banks have been bought up by regional banks. Regional banks have been bought up by national banks. National banks are being bought up by international financial conglomerates. The vice president at the bank down the street from your funeral home is now beholden to the corporate overlords at “Big Bank” in New York, London, or even Zurich. The “local bank” officer whose mom you buried and who you see at church no longer has the ability to help you when there is a problem with a preneed bank trust. The “policies and procedures” of “Big Bank” are made thousands of miles away by people the local bank officers will never meet.

Put bluntly, these Big Banks simply do not want to work with funeral homes. Far too often I take calls from WFDA members who either cannot access bank trust funds or to whom the bank will not even provide basic information. Funeral directors in Wisconsin share their frustrations with me and ask for my help… and there is often little I can do. The common theme is the bank being obstinate, if not openly problematic.

Time and again, I hear the same thing reported to me by our members. On average, the conversation goes like this:

Funeral director: “Hello, I have the Smith family coming in this morning to make arrangements for their mother, Jane Smith. She passed away last night. Her preneed account number is ABC123. Can you please tell me how much is in her burial trust account?”

Bank: “I will need a Death Certificate in order to provide that information.”

Funeral director: “I’m not asking that you release the funds. I just need to know the current amount. The family is coming in to make arrangements for their mom this morning. I won’t have a Death Certificate for a week at best. I need to know the amount in the account so that the family can make informed decisions.”

Bank: “I will need a Death Certificate in order to release that information.”

Funeral director: “But the family is coming in this morning to make arrangements for their mom. I need to know the amount of funds we have to work with.”

Bank: “I will need a Death Certificate in order to release that information.”

Imagine the embarrassment and frustration of a funeral director who has a family coming in for arrangements and the bank will not tell the funeral director how much money is in the preneed trust. The funeral home was the one that suggested the bank trust, but now is powerless to provide the basic financial information to the family.

There are ways to avoid this problem.

Instead, using one of the many non-bank preneed funding providers places the funeral director in a position of empowerment where there will not be the embarrassment and frustration of being unable to provide needed information to the family. A simple and quick call to one of the many non-bank preneed funding companies and the funeral director is ready to advise the family as to the funds available.

The traditional banks’ lack of cooperation is not the only problem confronting funeral directors and families. As a mortuary law practitioner, I am aware of several situations in Wisconsin where banks have turned preneed funds over to the unclaimed property division of the state. Some of these banks turn preneed funds over to unclaimed property after a mere twenty years.

Imagine trying to serve a family only to find out that mom’s preneed fund was turned over to a state bureaucracy as abandoned funds because mom didn’t pass away within the bank’s preferred timeframe. Mom’s longevity was an inconvenience for the bank… and a huge embarrassment for you and a serious problem for the family that you are trying to serve.

The solution: There are companies that want to work with funeral homes to provide proper, ethical, and comprehensive preneed funding. These companies show up at funeral director conventions to interact with you- the funeral director. These companies sponsor profuneral service programs, contribute to pro-funeral service organizations, and- unlike the banks- want to work with you.

I go to funeral director conventions and seminars all over the country. I have yet to see a traditional Big Bank promote funeral service… or even so much as have a booth by which to interact with funeral directors. It is not just that the bank does not care about you or your families… they consider preneed accounts annoying (at best). Note that I have yet to use the word “insurance” and am using the term non-bank preneed funding provider or a variation on that unofficial moniker. While preneed insurance is certainly one of the available options, there are non-insurance funding options (often called a trust company) which are also available to you and the families you serve. Many of these folks either focus solely on funeral service or have a division that is dedicated to preened funding. They are happy to work with funeral homes and families to fund preneed accounts and can be found actively supporting funeral service. The institutional knowledge many of these companies have allows them to specifically tailor their services pursuant to state preneed regulations. This is quite different than banks which tend only to think about traditional accounts and do not want to concern themselves with preneed regulations. I make no recommendation as to what option is best for your business or your families. Talk to all of them and make your own informed decisions. That said, I will state that in Wisconsin 99% of the time a non-bank funding option is better than the traditional bank option.

Generally speaking, the conscientious Wisconsin funeral director should not be writing preneed bank trust funds going forward- those funds should be placed with the non-bank preneed funding companies that want to work with you and have the best interests of the families you serve in mind. When preneeds that are already at banks can be converted over to non-bank funding sources (which may or may not be easy to do depending on the circumstances) they should be.

In conclusion, the dinosaur of the traditional bank preneed needs to go extinct. Do not be the funeral home that clings to the antiquated ways of yesteryear that work against your professionalism and which are not in the best interest of your families. In other words- do not let your reputation go extinct with traditional bank preneeds. New and better ways to fund preneeds have emerged and should be embraced by Wisconsin funeral directors- doing such is in the best interest of the families you serve. You have put too much work and dedication into this beloved Dismal Trade of ours to become part of the fossil record.

Michael D. Sharkey is a licensed funeral director and attorney who specializes in mortuary law and civil litigation. He serves as General Counsel to the Academy of Professional Funeral Service Practice and the Wisconsin, Minnesota, South Dakota, and Washington State Funeral Directors Associations. Sharkey is an equity Shareholder at the Minneapolis law firm Cousineau, Van Bergen, McNee & Malone, where he serves as Chair of the Mortuary Law Practice Group.

This article is dedicated to my colleague Jenna Krenz, WFDA Past President, who inspired me to write about traditional banks and preneed trust funding. My thanks to her.