IBA Compliance Connection

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We have a funeral home customer that is attempting to set up pre-need funeral trust accounts as separate accounts for each pre-need trust beneficiary, using each beneficiary’s social security number. We believe that Illinois law requires the customer to set up these accounts as sub-accounts under a master trust agreement, using the trust’s taxpayer identification number. Can you confirm?

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We are not aware of a requirement under Illinois law to pool all pre-need funeral trusts under a master trust account. The Illinois Funeral or Burial Funds Act expressly permits a trustee to commingle pre-need funeral trust funds, but it does not require such commingling. As trustee, your institution may exercise that statutory authority to commingle trust funds into a single trust account — and you may require funeral home customers to comply with that arrangement as a matter of bank policy — but a pooled arrangement does not appear to be required.

Also, while your federal regulator has not issued guidance on pre-need funeral trusts, the OCC has some discussion of pre-need burial trusts in its Comptroller’s Handbook. The OCC states that “banks frequently combine pre-need trust assets into a pooled investment fund,” without commenting on whether this type of arrangement is required.

For resources related to our guidance, please see:

  • Illinois Funeral or Burial Funds Act, 225 ILCS 45/1a-1(f) (“All sales proceeds received in connection with a pre-need contract shall be deposited into a trust account as provided in Section 1b and Section 2 of this Act, or shall be used to purchase a life insurance policy or tax-deferred annuity as provided in Section 2a of this Act.”)
  • Illinois Funeral or Burial Funds Act, 225 ILCS 45/2(b) (“A trust established under this Act must be maintained with a corporate fiduciary . . . .”)  
  • Illinois Funeral or Burial Funds Act, 225 ILCS 45/2(e) (“A seller or provider shall furnish to the trustee and depositary the name of each payor and the amount of payment on each such account for which deposit is being so made. Nothing shall prevent the trustee from commingling the deposits in any such trust fund for purposes of its management and the investment of its funds as provided in the Common Trust Fund Act. In addition, multiple trust funds maintained under this Act may be commingled or commingled with other funeral or burial related trust funds if all record keeping requirements imposed by law are met.”)
  • OCC Comptroller’s Handbook, Personal Fiduciary Activities, printed page 68 (“Banks frequently combine pre-need trust assets into a pooled investment fund, either a common fund (an A1 collective investment fund) established under state law and 12 CFR 9.18(a)(1), or a fund established under 12 CFR 9.18(c)(4) that is authorized by a state’s pre-need funeral or cemetery trust laws. . . .”)