Not All Funeral Homes Are Created Equal

You thought you had taken care of everything. Your family would not be troubled with a cremation decision at the time of your death.  After all, you completely paid for and signed a pre-need cremation contract with a reputable funeral home.

Think again.  Local funeral homes often add a post-death extra requirement.  Spouses won't have a problem, but if another family member is trying to set up the paid-for cremation at the time of death, many funeral homes insist that a multi-page Authorization for Cremation be signed.  The Authorization has the signer indemnify, defend, and hold harmless the funeral home and crematory (paying their legal fees) if they are caught up in a lawsuit over the disposition.

Sometimes the next of kin does not approve of cremation, which may be why you signed the contract beforehand.  What happens in the case where some kin won't sign the Authorization for Cremation?  One funeral establishment said a single relative's signing won't work if others object and suggested that the matter go to court.  Who is going to pay for that?  Also, some kin cannot be located.  One decedent's body had to remain chilled for 13 days while five adult children, who lived all across the country, were located and persuaded to sign.  Another family was pressured into securing notarized signatures from two elderly siblings who are afflicted with Parkinson's and Alzheimer's.  These elderly siblings were forced to go out in a snowstorm to sign.  Why aren't your wishes simply being honored? You paid the funeral home and signed a contract with explicit details regarding your wishes.

What does the law say?  Everyone agrees that your agent, under a power of attorney, does not control your remains since a power of attorney expires upon death.  An Executor under your Will does not control your remains. They only control your estate property.  Who controls your remains?  There is a form in a Texas statute which allows an Appointment of Agent to Control Disposition of Remains.  Of course this agent also assumes financial responsibility for the handling, to the extent it is not already paid for, in addition to other duties.

This same Texas law also provides that neither permission of next of kin nor an agent under the Appointment of Agent form is needed if you have already provided written directions for the disposition.  This includes cremation in a will, a prepaid funeral contract, or a written instrument signed and acknowledged by you.  In 2005, the Texas Attorney General wrote that a funeral establishment need not obtain "a cremation authorization form" signed by an "authorizing agent" when a purchaser of a prepaid funeral contract has previously specified disposition of the purchaser's remains by cremation ..." The decedent had already "authorized."

Question settled?  No. The 2009 Texas Legislature was persuaded to add a new section stating that the cremation authorization form is not required if (1) the decedent left proper written cremation directions and (2) the authorizing agent refuses to sign the form.  An attorney for a local funeral home interprets this to mean that there has to be both a prepaid cremation plan and a cremation authorization form signed by kin or an agent after death. The words arguably do not say this, but the attorney claims that almost all crematories require the forms.  Oddly enough, the added law allows a crematory to cremate without the form if (1) cremation costs are paid and (2) the authorizing agent provides a positive written identification of the human remains.

Why do funeral establishments add requirements which the law does not?  The friends and/or family are in a weak bargaining position; burdened by grief, pressured by time, reluctant to argue in court while the funeral home has the body.  A suit on the contract could be considered or a transfer could be made to a cooperative funeral home, but these are very inconvenient options. Some funeral homes and crematories are concerned about being involved in a lawsuit, but the law provides that a funeral home or related entity shall not be liable for carrying out the written directions of a decedent or the directions of any person who represents that the person is entitled to control the disposition of the decedent's remains.  If they cannot be liable for carrying out your wishes then they have no reason to require your agent or kin to sign their form and agree to indemnify them.

Should you find yourself in such a predicament and persuasion does not work, the consumer has the recourse of filing a complaint with the Texas Department of Banking at http://www.dob.texas.gov/forms/com-form.pdf.  Also, before you buy a prepaid cremation plan, or even if you already have one, consider talking with your lawyer about how to handle this situation.

IRS Improving Art Appraisal Services

An appraisal is an expert assessment of the value of a particular asset at a given time. Many factors involved in the appraisal of a property can easily distort its value--overvaluing or undervaluing it. The IRS uses appraisals in the process of assessing property taxes, which requires the appeal of experts in the subject. As such, the IRS's Art Appraisal Services' (AAS) job consists of assessing the value of works of art for tax purposes.

A recent article in Accounting Today discusses the IRS' need to improve its appraisal of the value of art and the Government Accountability Office (GAO) report on the matter. The GAO report set the spotlight on the lack of comprehensive quality review and continuing education requirement for the IRS' appraisers, which consistently result in a misstated and most times unfavorable appraisal for the taxpayer.

The report examined not only the appraised values of artwork but also other categories of property such as real estate, automobile and businesses, reaching the conclusion that the burden on taxpayers could be reduced and selected practices improved.

Concerning art appraisals, the report found that the valuation of the property has a huge impact on the tax liabilities of individuals who make non-cash charitable donations or who receive inheritances or gifts of property. Appraisers' task requires them to be familiar with the subject matter and be able to note any factors that may affect the value of the property (e.g., location, surrounding area and condition of the property). But, some properties such as art, real estate, businesses and easements have very unique characteristics, making an independent appraisal essential to determine exactly how much the taxpayer should report to the IRS.

The GAO recommended that the IRS offer a continuing education program to its appraisers, along with a comprehensive quality review program, specifically for the AAS staff. They also suggested that Congress should consider raising the dollar threshold at which qualified appraisals are required for noncash contributions to reflect inflation.

Making Sure the Surviving Spouse has Income

The National Association of Personal Financial Advisors was recently polled determine common surprises encountered by their clients planning for retirement. A Chicago Tribune article highlighted one of the most common responses from those advisors:  a failure to set aside significant income for a surviving spouse.

It is one thing to examine how long an individual is expected to live, subtract that from their current age, and determine how much is needed each of those years. By no means is this an exact science, but it is somewhat intuitive to roughly understand how much a single individual needs to retire. Things get more confusing, however, when spouses get thrown into the mix. As one planner interviewed for the article noted, "One thing people don't plan for is the reduction of income if a spouse or partner dies."

Think about Social Security. When two partners are alive, each may receive Social Security benefits. However, if one of the spouses dies, his or her income will disappear. Even taking into account a larger benefit for the surviving spouse, the overall family income will be lower than before. Similar problems can arise for those living off a pension. A spouse's death may cause the pension income to dry up. If not accounted for, this can thrown some seniors into a financial tailspin. One professional interviewed for the Chicago Tribune story told of a recent client whose retirement income dropped 35% following her husband's passing, but who found only a 10% decrease in expenses. This ultimately required a significant lifestyle change for the woman at the very moment when she craved stability following the loss.

Various tactics can be used to minimize the long-term consequences and provide more stability no matter what the future holds. For instance, a higher-earning spouse may choose to refrain from taking Social Security. This may earn him or her "delayed credits" up to 8% a year until the age of 70. If that spouse passes on, the surviving spouse may be able to switch to the value of the other's benefit, including delayed credits and cost-of-living adjustments. For pensions, a "joint and survivor annuity" might be appropriate, where less is paid out monthly for the peace of mind of knowing that income will continue even if the pensioner dies first.