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The death merchants scam you to the very end

Fellow Durhamite Barry Yeoman has a piece up in AARP Magazine, R.I.P. Off, about the fleecing of thousands of people by the poorly regulated funeral industry.

The latest scam involves the fairly popular practice of pre-paid funeral plans, where you buy your arrangements (embalming/cremation services, burial plots, caskets, etc.) ahead of time at today’s prices. It’s a great idea in principle, since people don’t want to have to think about such matters at such a stressful time.

And that’s what these scam artist death merchants count on. Take the case of Forest Hill South, a mortuary and cemetery located in Memphis. Audrey and Carl Brewer purchased a pre-pay plan for the family, forking over almost $1300 over time for funeral services. And you know what happened?

The Brewers had no reason to question the honesty of Forest Hill. Its three locations had been in business since 1888, serving the rich and the poor alike, including such luminaries as Elvis Presley and his mother, Gladys. Like the Brewers, thousands of customers from Tennessee, Mississippi, and Arkansas had also trusted the company’s reputation enough to buy pre-need policies. Then in July 2006, one of Forest Hill’s new owners, Oklahoma oilman Clayton Smart, called a press conference to announce he was invalidating 13,500 pre-paid funeral contracts, including the Brewers‘. While police stood by to prevent a customer riot, Smart explained that any contract holder who wanted to use his or her pre-need policy would have to pay an additional $4,000, more or less, at the time of death, even if the plan was already paid in full. “Obviously, things were a lot cheaper in 1965,” Smart explained. “I wouldn’t have bought the business if I thought I’d have to honor those contracts.”

Officials with the Tennessee attorney general’s office offer a different explanation for why Smart wasn’t honoring the contracts. They allege Smart and his partner, attorney Stephen Smith, drained the company’s pre-need trust funds of $20 million shortly after they purchased Forest Hill in 2004. Those funds, which were part of the purchase and were earmarked to pay for the pre-paid funerals and cemetery care, “were supposed to be in very conservative investment vehicles,” says Martha Davis, a senior counsel in the state’s bankruptcy division. Instead, she says, Smart and Smith diverted the money to risky hedge funds and unsecured loans owned by Quest Minerals and Exploration, an oil-and-gas company controlled by Smart’s family. The attorney general’s office says the Quest loans ended up being worthless.

As Barry’s report continues, it’s pretty clear that this was not an isolated incident. People (and their relatives) who purchase these policies are getting ripped off  as outrageous excuses and bait-and-switch tactics by these death merchants rip them off at the worst possible time in the life of a family.

More, including a question of the day, is below the fold.According to the AARP, 23% of people 50 and older have signed pre-payment contracts for funerals and/or burials. Even those in the industry acknowledge the scandal is a significant problem.

“This is not every once in a while, and it is not just a few bad apples,” says Joshua Slocum, executive director of the Funeral Consumers Alliance. “People want to believe that if they sign a check now for a pre-paid funeral, they can close their eyes and say, ‘La, la, la, everything’s going to be fine.’ It’s a dangerous delusion.” A delusion because too often funeral companies change hands, close their doors, or simply raid the trust funds where their customers’ payments are supposed to be securely collecting interest. As a result, when the services are needed, there’s no money left. Even worse, because of inconsistent state regulation and enforcement, there’s often no recourse for distressed families who thought everything was taken care of.

…But even customers dealing with trusted funeral homes must study their policies. Otherwise, details-often buried in the fine print-can pop up to surprise at the worst moment.

One of the most common complaints about pre-need involves the casket bait and switch: the customer asks for a specific casket, but when the time comes, it’s not available and the funeral home offers a lesser-quality model. In 1999 Katie Smith, a retired practical nurse, pre-paid a Chicago funeral home for her service. She chose a lavender casket. When she died in 2006, the mortuary insisted that a lavender casket had to be special-ordered and would take ten days to arrive. “I didn’t want to hold up the arrangements that long,” says Katie’s goddaughter, Alicia Hill, who reluctantly accepted an “iridescent pink” casket. Alicia believes her godmother would have been disappointed.

If you’re looking to the feds for help, don’t hold your breath. Senator Christopher Dodd (D-Conn.) and former Rep. Mark Foley (R-Fla., a state with a high senior population), so that’s not surprising) tried twice to introduce bills to protect consumers that enter pre-pay arrangements, but Congress never even took up the legislation.

This is a lengthy and important read; I encourage you to read the rest. People who enter into these contracts get little if any help from the state when a deal goes bad. Many don’t mandate refunds to customers or allow them to transfer their policies to another funeral home if they relocate to another part of the country. Your money goes up in smoke.

Q of the day: have you done any advance planning so that your loved ones know your wishes when you pass away?

My mom wanted immediate cremation, no urn, no plot, no service. She didn’t believe in handing over cash to the death merchants. When she passed away in 1997, I followed her written wishes (though we had discussed it many times and was clear on what she wanted). A few days later the Cremation Society of the Carolinas sent me a plastic box containing a plastic bag with her ashes. I think the whole cost was around $500. My brother and I then flew up to NYC, where I cast her ashes into the East River from a pier in downtown Brooklyn, the borough she was born and grew up in.

We have the same philosophy — save the money for a good remembrance party afterwards.

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Pam Spaulding

Pam Spaulding