{"id":2012,"date":"2023-06-07T02:28:04","date_gmt":"2023-06-07T02:28:04","guid":{"rendered":"https:\/\/www.funeralvision.com\/?p=2012"},"modified":"2023-06-07T02:28:04","modified_gmt":"2023-06-07T02:28:04","slug":"the-markets-impact-on-your-endowment-care-trust-and-the-solution","status":"publish","type":"post","link":"https:\/\/www.funeralvision.com\/the-markets-impact-on-your-endowment-care-trust-and-the-solution\/","title":{"rendered":"The Market\u2019s Impact on Your Endowment Care Trust … and the Solution"},"content":{"rendered":"

By Bill Williams, president\/CEO, Funeral Services, Inc.<\/a>
\n<\/strong><\/span>and Wendy Russell Wiener, managing member, WRW Legal, PLLC<\/a><\/strong><\/span><\/em><\/p>\n

We are willing to bet that you received a greater rate of return on your \u201cincome only\u201d endowment care trust in 2021 than you did in 2022. Of course, the dip in the market that occurred in the second half of 2022 dragged down your rate of return.\u00a0 And, a lower rate of return equates to a lower distribution to your cemetery for care and maintenance, which is not helpful during this time of rising prices.\u00a0 The shaky market of early 2023 may result in another year during which your endowment care trust distributions don\u2019t effectively support the upkeep of your cemetery.<\/p>\n

The very purpose of an endowment care trust is to support, forever, the care and maintenance of the cemetery.\u00a0 The legislatures of yesteryear understood that once a cemetery has sold all available interment rights, it will not have a ready source of income to support the upkeep of the cemetery.\u00a0 So, laws were enacted in nearly every state that require a percentage of each interment right sale, whether in ground or above ground, be deposited into trust.<\/p>\n

Until roughly a decade ago, all such trusts were only legally permitted to distribute realized trust income \u2013 hence the nomenclature \u201cincome only trust.\u201d\u00a0 Cash in an income only trust resulting from dividends and interest is distributed on a schedule as permitted by the applicable state law.\u00a0 Distributions fluctuate from month to month, quarter to quarter and year to year dependent entirely on the effectiveness of the investment management of the trust funds.<\/p>\n

It is a basic tenet of investing that if the goal is to throw off income, then investments are geared toward that end and not<\/em> to the growth of the corpus, or overall value, of the trust.\u00a0 If a trust is not invested for growth, and growth by way of additional deposits slows or comes to an end, income could become stagnant and may not be able to keep up with inflation, which could ultimately defeat the purpose of the trust:\u00a0 to provide funds necessary to care for the cemetery in perpetuity (the legal term for \u201cforever\u201d).<\/p>\n

\"\"
Bill Williams<\/figcaption><\/figure>\n

To address the long recognized, but not-yet solved problem, cemeterians began to look for a solution to their needs for forever upkeep.\u00a0 Recognizing the strategy of most charitable organizations, universities and endowments, cemetery owners started to investigate whether a total return trust was an answer.<\/p>\n

It is.<\/p>\n

A total return trust, sometimes called a unitrust, is one that is invested differently and distributes money differently than an income only trust.\u00a0 Generally, here\u2019s how a total return trust works:<\/p>\n