Ala. Admin. Code r. 395-X-9-.01

Current through Register Vol. 42, No. 10, July 31, 2024

Section 395-X-9-.01 - Preneed Contract - Defined

(1) For purposes of this Chapter, a preneed contract is a written contract:

(a) entered into on a preneed basis (before the death of the contract purchaser or beneficiary);

(b) under which the purchaser pays or agrees to pay to the seller, before need and in whole or part, a purchase price for funeral merchandise and services or cemetery merchandise and services; and

(c) the seller's responsibility to deliver the contracted-for merchandise or perform the services, in whole or in part, is deferred until need.

(2) The Following arrangements or transactions create a preneed contract:

(a) Transactions which combine a current sale with an agreement for delivery or performance at need and in which the purchaser assumes a current obligation to pay for future delivery or performance.

(b) Transactions in connection with selection of funeral or cemetery merchandise or services which result in a preneed provider being designated, on a preneed basis, as a beneficiary or assignee of a financial instrument intended to provide funds for payment of merchandise and service costs at need (i.e., a life insurance policy or annuity, or a deposit of funds like a bank account or certificate of deposit), whether revocable or irrevocable, unless, the preneed seller and the purchaser acknowledge in writing that there is no agreement concerning the purchase of funeral or cemetery merchandise and services entered into as a result of the purchase or assignment of the life insurance policy or annuity at the time of such purchase or assignment.

(c) Any transaction or series of transactions which employ any artifice or scheme to evade, or have the effect of evading the requirements of, this Chapter and the Act.

(d) Any transaction in which a seller delivers the merchandise into some warehouse-type or other storage arrangement controlled by the seller until need.

(e) Any transaction deferring delivery or performance until need or until completion of installment payments.

(f) Any transaction involving vaults or other outer burial containers which, by their nature, require future service in the form of reopening, cleaning and/or repair or replacement, placement of the casket, sealing, closing and covering.

(g) Any transaction involving any type of funeral or cemetery services that are not capable of being performed until need.

(3) Except as provided in the preceding section, the following arrangements or transactions do not result in a preneed contract subject to this Chapter even if entered into on a preneed basis:

(a) A retail sale of merchandise and immediate services - delivery or installation - directly relating to that merchandise where:

1. The purchaser pays immediately or agrees to an installment payment plan.

2. The seller delivers the merchandise to the purchaser immediately or within a contractually-defined reasonable time after payment not tied to need or to completion of installment payments. The purchaser must have legal title to and possession of the merchandise upon delivery into a storage arrangement controlled by the purchase or by virtue of installation on property under the purchaser's control (such as a cemetery space). Provided, that the seller may retain a security interest in the merchandise in a transaction involving an installment payment arrangement where merchandise will be delivered before completion of payments.

3. No future service relating to the merchandise will be required to realize effective use of the merchandise.

Non-inclusive examples of such transactions include caskets and memorials and related services such as delivery and installation of the merchandise.

(b) A prearrangement through which the purchaser specifies certain merchandise and services to be purchased at need, the seller agrees to sell that merchandise and those services at need with or without a preneed agreement on price (or an agreement about how a price will be determined at need), provided that the prearrangement contains no provisions for prefunding or prepayment.

(c) The sale of an interment right in a grave space, crypt, or mausoleum provided that the purchaser receives evidence of ownership of the right upon payment and the sale is not accompanied by the sale of any merchandise or service.

(d) Sale of a "return of mortal remains plan," addressed in Rule 395-X-9-.02, in conjunction with a preneed contract.

(4) A contract or agreement that is not a preneed contract shall not represent that portions of a purchaser's payments are being placed in trust (except as necessary to comply with the requirements concerning cemetery endowment care funds) unless such deposits have been made in fact or otherwise represent or imply that the contract complies with the Act.

Ala. Admin. Code r. 395-X-9-.01

Adopted by Alabama Administrative Monthly Volume XLII, Issue No. 06, March 29, 2024, eff. 5/13/2024.

Author: Charles M. Perine

Statutory Authority:Code of Ala. 1975, §§ 34-13-26, 34-13-27, 34-13-170 to -277.