BILL NUMBER: AB 2079 CHAPTERED 09/27/00 CHAPTER 757 FILED WITH SECRETARY OF STATE SEPTEMBER 27, 2000 APPROVED BY GOVERNOR SEPTEMBER 26, 2000 PASSED THE ASSEMBLY AUGUST 23, 2000 PASSED THE SENATE AUGUST 22, 2000 AMENDED IN SENATE AUGUST 18, 2000 AMENDED IN ASSEMBLY APRIL 4, 2000 INTRODUCED BY Assembly Member Granlund FEBRUARY 22, 2000 An act to amend Sections 7735 and 7736 of the Business and Professions Code, relating to funeral arrangements. LEGISLATIVE COUNSEL'S DIGEST AB 2079, Granlund. Preneed funeral arrangements. The Funeral Directors and Embalmers Law provides for the licensing and regulation of funeral directors and embalmers by a program under the supervision and control of the Director of Consumer Affairs. A violation of these provisions is a crime. Existing law regulates agreements relating to preneed funeral arrangements, under which a consumer pays a funeral establishment in advance for services, property, or merchandise not immediately required. Under these provisions, the money or securities are held in trust, and income from the corpus of the trust may be used for certain purposes, including the payment of a reasonable annual fee for administering the trust, including a trustee fee, which is to be determined by the Funeral Directors and Embalmers Program. This bill would delete the requirement for the annual administration fee to be determined by the Funeral Directors and Embalmers Program. This bill would provide that the annual fee for trust administration may be recovered by withdrawals from accumulated trust income, provided that the total withdrawals for this purpose shall not exceed the amount determined by the Cemetery and Funeral Bureau of the Department of Consumer Affairs, but not to exceed the total amount of posted trust income in the immediate 12 preceding months. This bill would make other related changes. Because a violation of the bill's provisions would be a crime, this bill would impose a state-mandated local program by changing the definition of a crime. The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement. This bill would provide that no reimbursement is required by this act for a specified reason. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 7735 of the Business and Professions Code is amended to read: 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. SEC. 2. Section 7736 of the Business and Professions Code is amended to read: 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. SEC. 3. No reimbursement is required by this act pursuant to Section 6 of Article XIIIB of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIIIB of the California Constitution.