Funeral Trust Questions

[Newby]

I seem to have a new crop of agents e-mailing and calling me with questions about getting into funeral trusts. I'm going to post one here so others that have the same question can read it.


Mtr. Burke,

I tried to call you on the phone but was told to email you. I am an agent from Texas where I have primarily been involved in Medicare Supplements and Medicare Advantage plans.

Now that Medicare AEP is over, I've been receiving emails from various FMO's asking me to get involved in final expense and funeral trusts. All of them claim I can make at least an extra 10K a month with funeral trusts and I went on some webinar. After attending these webinars, I was still skeptical about their monetary claims and so I did further research on various blogs which eventually led me to yours.

I found your answer about dealing with funeral homes directly to resonate with what I was thinking. I was told from other people that they usually have people who specialize in it who work directly with the funeral homes. So my question is this: How do you approach funeral homes to see how they might be able to utilize my services, whom do you contact usually, and what kind of split do you do with them.

I understand your busy but I'd appreciate some sort of feedback from you as to how to correctly pursue this further.

Thank you,

Agent Bodean



My reply:

Usually the agent who sell funeral trusts successfully gets hired by the funeral home either as an employee or as a contract agent. You usually have an office inside the funeral home and work through their client base and also handle call ins and walk ins.

In most cases you have NO lead cost or marketing expense and often have employee benefits. It's more like a job and not as much freedom as a completely independent agent.

Most agents doing this successfully make from $50,000 to $75,000. Some make less and some make much more.

The seminars you have attended are probably recruiters who sell the stand-alone Funeral Trust without an actual funeral home involved. I know one recruiter sends me spam at least 3-times a week on it with all different sorts of marketing angles (working with lawyers, working with veterans, etc.) He tries everything except the one that works the best (working with funeral directors.) When you sell for a funeral home, the cut that the FMO marketer gets usually goes to the funeral home if they have an insurance license.

The stand alone trusts can be sold if you have a large base of clients who depend on you for financial advice. Other than that it is a pretty rough sale (my opinion). Also you are limited to single pay plans which don't pay as well as the monthly pay plans do. The growth rate for the client is usually cut down to 2% (because FMOs focus on commisions vs. funeral homes focus on policy growth) which also makes it a poor choice for the client.

If I were you and you want to stay very independent I would sell Medicare Supplements which you can sell year round. You can cross sell final expense and the occasional funeral trust if you run across one.

If you want more like a job experience and want to work in a funeral home, just have the insurance companies you contract with on funeral trusts (NGL, ForeThought, Homesteaders, Lincoln Heritage) find a spot at a funeral home for you. You will need to contact the insurance companies directly for the because the FMO will get cut out of the deal.

That's my opinion anyway.

 

[xrac]

Thank you, Newby! You are da' man when it comes to this stuff!

 

[Mark]

Newby is the expert in a lot of things when it comes to final Expense or anything to do with trust or funeral homes.

If he wrote a book, I'd buy it.

 

[Newby]

I got a call recently from a man that bought 5 funeral trusts from an agent / lawyer combo because his mother is in a nursing home and headed toward Medicaid. They used MY website as part of their marketing material.

He called me because my info was on the marketing material. His question was "Are you allowed to do funeral trusts on the mother and all the kids to avoid losing the money to Medicaid."

I told him that in Kentucky you absolutely should NOT do that because Kentucky will not recognize the irrevocable trust as a funeral trust on anyone who does not apply for Medicaid within the first 30 days. The kids trusts will be exposed to the 5 year lookback.

He told me he already had done 5 of them for $15,000 each. The Medicaid office was telling him the same thing I did. He was screwed. He needed to come up with $60,000 out of his own money (not mom's money) to keep mom on Medicaid. If he can't do that quickly he would be sued for Medicaid fraud and pay 4 times in penalties.

Be careful what your marketing company is telling you to do to people.

 

[Briefcaseboy]

I know nothing about Funeral Trusts, but if it is in an irrevocable trust, how do you get access to the money that you are trying to protect from Medicaid ? We also have the 5 year look back period in Arkansas.

 

[Newby]

I know nothing about Funeral Trusts, but if it is in an irrevocable trust, how do you get access to the money that you are trying to protect from Medicaid ? We also have the 5 year look back period in Arkansas.

You get it upon death to pay for a funeral.

The trouble is, only the person that is actually going on Medicaid has no 5 year lookback. The others are subject to that in Kentucky.

So the agent so the agent got them to put $75,000 of mom's money in the irrevocable trust policies and they can NOT access the money. But Medicaid doesn't allow $60,000 of what they did. So the son has to pull $60,000 of his own retirement money and add it back to mom's spend down account.

States are getting tough on Medicaid and I wouldn't want to be an agent pulling crap like this in a state that doesn't allow it.

 

[Briefcaseboy]

I have heard of a Miller trust that people in some states use to protect money etc. from Medicaid. In Arkansas they assign their property to their children, but must do so at least 5 years before entering a nursing home. That is why people who have a lot of assets should purchase LTC insurance.
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Newby,

It looks like the insurance company would be liable for the actions of the agent who talked this guy into doing this. In other words talking someone into violating state law. Would this be considered acting in the capacity of a financial advisor, which is a no no.

 

[Newby]

I have heard of a Miller trust that people in some states use to protect money etc. from Medicaid. In Arkansas they assign their property to their children, but must do so at least 5 years before entering a nursing home. That is why people who have a lot of assets should purchase LTC insurance.
- - - - - - - - - - - - - - - - - -
Newby,

It looks like the insurance company would be liable for the actions of the agent who talked this guy into doing this. In other words talking someone into violating state law. Would this be considered acting in the capacity of a financial advisor, which is a no no.

It's not the insurance company. It's certain FMOs that are promoting funeral trusts as a get rich quick scheme to agents. They strip the growth out of them to take 30%+ commissions and teach the agents activities that are borderline passable in some states and send them out in the world with just enough knowledge to be dangerous.

There was a lawyer partnered with this agent so I imagine the main liability will fall back on these two. The client was embarressed that he went along with it when he knew it sounded unethical. So I think he is just going to pay the money back out of his retirement money and not go after the agent too hard. I told him that's a great way to reward a bad agent if he does.

 

[Briefcaseboy]

Newby,

What I was referring to was " The Principle of Agency " the actions of an agent are deemed to be the actions of the insurance company.

 

[Newby]

Newby,

What I was referring to was " The Principle of Agency " the actions of an agent are deemed to be the actions of the insurance company.

I was not familiar with that term. I'm sure the insurance company will back down if pressed though and do the right thing for the client. They are a quality company.

I'm not sure the client will push it real hard though because he already feels that he joined in to try to take advantage of Medicaid. He doesn't want to get himself in more trouble.