How to Ensure Effective Trust Fund Management and Why It Matters

Discover why a cloud-based financial management solution is essential for overcoming the challenges of managing your trust funds.

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| Read time: 5 mins

In terms of cemetery financial management, what does the word ‘trust’ mean to you?

The trust that customers have in you to look after their money? The trust you have in the systems and processes you’re using to manage those funds effectively? The trust you have that your information is accurate? And of course ‘trust’ in the literal sense of the mechanisms by which you manage those assets.

But before we stretch this literary device beyond breaking point, why is this important?

Because navigating all of that doesn’t happen by accident.

In this blog, we look at the challenges inherent in managing trusts effectively, why paper-based systems aren’t always helping and, how a cloud-based financial management solution is essential in overcoming them.

 

Why trust funds?

 

In simple terms, a trust is an arrangement in which a person or group has the legal authority to control certain assets or money on behalf of another [1]. 

In the context of cemeteries, or crematoria money is placed in trust with trustees who look after and manage the funds. Those are typically set aside to ensure the long-term, perpetual care of the cemetery - whether that’s general maintenance, landscaping, repairs, long-term upkeep of gravesites and so on.

A trust, such as an endowment care trust fund, in effect then, is “designed to ensure that income will always be available for the continued maintenance and upkeep of the cemetery, even when all the interment spaces are sold.” [2]

The point here being, that where traditional sources of income for cemeteries or crematoria may be finite, trusts provide a way of remaining sustainable and fulfilling obligations.

The obligations, duties and responsibilities of trust funds are not be underestimated - in the US, laws may vary from state to state, with some governments mandating that a portion of cemetery sales are set against a maintenance fund to maintain graves and cemetery property in perpetuity. [3]

In other words, they're an issue of legal compliance.

Ultimately, the reason for this is so that the cemetery does not run out of money, mitigating the risk of having to secure funds from elsewhere, for example, from the families of the deceased. 

With all of this in mind, we can begin to see why managing those funds effectively is so important.

For families, trusts provide assurances that their resting place, or that of family members, will be cared for long into the future, and that the funds will be available at the time of fulfilment - regardless of any changes in circumstances (such as a change of cemetery ownership); along with the peace of mind that comes with it.

For cemeteries, they help to ensure financial stability, as well as sources of income for ongoing maintenance, avoiding states of disrepair, upholding, not only contractual obligations, but compliance with the state laws and regulations that govern the administration of such funds.

Importantly, in fulfilling obligations in terms of perpetual care, cemeteries are also maintaining trust - trust from families and their wider communities, in continuing to provide services where and when they are needed most.

Not only this, but the income gained from trust fund investments can help to ensure long-term sustainability for the cemetery - something of increasing importance as availability of plots (and therefore revenue streams) becomes more limited.

 

Trusts and pre-need

 

To misquote Benjamin Franklin, nothing in life is certain except death, taxes, and inflation.

And so, one of the selling points of a pre-need contract for individuals becomes a challenge for a cemetery or crematorium. Come fulfilment, it's most likely that the cost of those items and services will have increased in value over time.

And where a price-freeze guarantee has been given, that cost difference will inevitably transfer to the provider.

With careful trust fund management, most commonly outsourced to a third party fund management company, the fund can accrue interest over time, with view to meeting the increased cost of the item or service at the inevitable point of need.

Another reason why managing trusts effectively is crucial, is to ensure profitability for the cemetery or crematorium - something that isn’t always assured when using older, disjointed and paper-based systems.

It’s all in the maths.

 

The challenge of trusts

 

As with any form of asset management, there are inevitably some complexities that, if not addressed in the right way and without the right systems in place, may cause issues for the cemetery or crematorium operator.

There is of course - as already mentioned - the navigation of legal requirements based on state regulations, which may to a greater or lesser degree dictate things such as investment guidelines or minimum funding requirements.

Speaking of reporting, having all of the information you need to hand to keep key stakeholders informed is essential, and for which careful and accurate record keeping is crucial.

On a similar note, for auditing purposes, you should have comprehensive visibility of financial records, admin procedures and investment activities, with a clear trail of what went where, to whom and when, providing the ability to address any potential discrepancies and resolve quickly.

There are of course, the potential legal risks associated with mismanagement of funds or non-compliance with statutory regulations that may result in lawsuits, or even reputational damage.

 

Paper

 

The problem with paper

 

The bottom line is that keeping track of monies in trust requires accurate record keeping, and while paper systems and spreadsheets aren’t always the enemy, they do have certain limitations when it comes to financial management.

We can’t avoid the human element completely, regardless of whichever systems we use, but manual record-keeping is inherently more time consuming and prone to basic errors or inaccuracies - all of which may lead to discrepancies that if not discovered until a later time may be more difficult to rectify.

Losing track of funds also poses financial risk - for example, where items or services have been delivered, yet that money remains within the trust account.

Limits of disjointed paper systems may also, of course, be exacerbated through staff attrition - when staff leave, how can the information that's ‘in their head’ be retained or retrieved?

Together, all of that means a lack of data accessibility that hinders collaboration, a lack of data integrity that's subject to error or loss, more limited reporting functionalities, making it more difficult to monitor, manage and assign funds appropriately, manual processes creating risk and inefficiencies, difficulty in tracking and posing challenges to compliance.

With all of that said, let's get to the rub.

 

Why a digital financial management solution?

 

A cloud-based solution that integrates all aspects of your trust fund financials into your business systems will eliminate many of the challenges of trust fund management we’ve discussed, and overcome the limitations of paper.

It does this by streamlining your processes - connecting your contract sales and financial data in a way that provides greater overall visibility and control.

How?

By providing more efficient workflows that automate basic tasks, or by allowing users to track deferred revenues without the need for multiple systems or reconciling between conflicting sources of information.

The real-time reporting capabilities they provide also allow you to analyse your information, allowing you to make more data-driven decisions and look at trends to optimise your financial strategy.

They’re more user-friendly, providing instant access to data without the need to pore through reams of information, and provide greater levels of accountability, showing stakeholders exactly what’s been done, when, why and by whom.

In short, they save time, money and risk by minimising manual processing, and ultimately provide a better experience for both families and staff.

 

Take the headache out of finance

 

Cemetery and crematory operators can now create and manage trust funds, deferred revenue, liabilities and more, all from within PlotBox’s expanded suite of financial management tools.

This gives PlotBox customers flexibility in moving monies in and out of the relevant trust funds, with visibility of fund balances based on contract sales, cancellations and fulfilment, as well as any accrued interest the fund makes over time.

As part of this consolidated functionality, users can also set a proportionate amount of each sale to a trust and define where that money is to go - whether, for example to endowment care, merchandise or services, as well as adjusting balances and applying interest.

A user-friendly dashboard also enables users to easily pull reports on a variety of areas, including balances, withdrawals, cancellations and transactions, while the fund activity report provides a view of all funds over specified time periods - for example, what was funded against which contracts - information that can then be exported and provided to the trust fund manager.

No one knows your data better than you. PlotBox gives you the power to manage your funds in the best way possible.

Learn more about managing your finances with PlotBox.

 

Refs

1 https://www.equifax.co.uk/resources/money-management/trust-funds.html

2 https://iccfa.com/blog/endowment-care-trust-funds/

3 https://cemeteries.uslegal.com/cemetery-maintenance/maintenance-funds/


 

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