>>>BTW, based on my multi-state experience, most care fund investments are based on the prudent man rule which would allow investment in stocks, bonds and other listed securities. Care funds can even write covered calls in most states. <<<
I checked the rules in my state and you are correct pouncer. Not having involvement since 1985 with care funds I appreciate the information even though I wonder about the "prudent man rule". Could it be a prudent trustee could turn imprudent and buy such shares as Enron, WorldCom and perhaps U.S. Airways? If so there could be many sunken graves going without repair and some very long grass to be mowed out at the local cemetery.
I doubt any cemetery I have knowledge of has a care fund which exceeds 5 million and I am giving them the benefit of the doubt. 20 or 30 million is impressive. I guess we would need to measure that against the size and care needs of the property.
Congrats to Lexington Cemetery for their resolve to generate a large care fund.
I realize that I cited a hypothetical situation however, I have several clients over the past few years that are starting new cemeteries. One of my main goals is to ensure that they are setting aside adequate funds for future care. Also, as you know, the 1000 grave per acre goes up when yoy do mausoleums or cremation gardens.
I would love to cite specific exa,ples of cemeteries with adequate care funds however, confidentiality agreements prevent this. I will state that I have clients with 5, 10 20 and even 30 milion in care funds. I also have clients with 300,000. It varies all over and the amount required is dependent on many factors - total acres, flush or monument, number of bushes/plantings, how well the cemetery was planned out, etc.
BTW, based on my multi-state experience, most care fund investments are based on the prudent man rule which would allow investment in stocks, bonds and other listed securities. Care funds can even write covered calls in most states.
As to a curent 5% after expenses yield - no problem. I have a number of clients achieving this and still having a portion of the portfolio in equities to generate gains - hopefully.
>>>However, I do agree that there are many cemeteries that do not currently have adequate funds due to past practices.<<<
May I respectfully suggest that inadequate care funding is common in most cases. Your example in your post is a perfect situation which is non-existent. Most cemeteries are providing care in the year 2002 with care funds collected over the years when even recently graves were sold for as low as two or three hundred bucks. Inflation eats away at the principal of these funds and operating costs continue upwards incessantly perhaps creating huge difficulties in maintaining the properties in the future when all activity ceases.
In this day and age a 5% return could also be difficult after cost of administration and reporting. If I am correct most states dictate what investments are appropriate for these funds, generally fixed income investments I believe. Capital gains would be minimal if almost non-existent.
Instead of fictitious examples I would be pleased if some cemetery folks can show me where I am wrong when I criticize what I see as shading the truth when perpetual care and endowment care is used in a sales pitch. Seldom are questions asked about these funds and if a question is asked facts are difficult to come by.
Here is a link to a cemetery web-site wherein this property seems to be doing things correctly. 60% of all sales set aside for future care. http://www.lexcem.org/serv3.htm
Yes, that is an extreme example of a neglected cemetery. Typically, these small cemeteries have a history which includes starting out many years ago before a care fund was required. The majority of the graves were sold without any care funds set aside and when current revenues decline, the inevitable happens.
If you take a current cemeteryof say 30 acres and a yield of 1000 graves per acre selling for 1000 each with 15% care fund, you end up with a care fund of $4,500,000, not including any capital gains. a 5% yield produces 225,000 per year. This, IMHO, is adequate to cut grass, trim around memorials, trim hedges and maintain the roads etc. Remember, if there are burials going on still, that those funds would pay for the backhoe and extra staff.
However, I do agree that there are many cemeteries that do not currently have adequate funds due to past practices.
>>>Guess that is similar to LD waiting for the perpetual care funds for major cemeteries to be proven inadequate.<<<
Yes, it is difficult to prove inadequacy of these funds. Most cemeteries are quick to advertise they have an "endowment care fund" or "perpetual care fund" in place designed to provide care in the future. Just ask for the details and one gets the idea we are dealing with a national security issue. Often times the cemetery representative lacks the knowledge themselves and the management ducks the issue.
My knowledge of cemetery care funds admittedly extends to properties which I have been employed in the past and a few others in my community. I have yet to find a corporate owned or privately owned property which will be able to carry on a decent program of care after all graves are sold and the promoters move on. Simple arithmetic will enforce this opinion.
Cemeteries are an unfair legacy to leave to future generations! Truly unfair when the public at large is required to take charge of a mess of dead bodies for which all interest by those who should be concerned is absent.
Here is a link to an article which describes an extreme case of cemetery history.
Yes - anything could happen in the future. As a matter of speculation about the future, could it be that the cow will jump over the moon? Ever since I heard that statement in a children's nursery rhyme, I have been waiting for it to happen. LOL. Guess that is similar to LD waiting for the perpetual care funds for major cemeteries to be proven inadequate.
i never said that a corporate-ownde cemetery had been taken over by a municipality. like you, i do not believe that this has happened. not yet anyway.
loweringdevice suggested that it *could* happen in the future.
we were talking about long-term prospects. 50 year time frame.
hope that clears it up for you.
I am aware of non-profit, private association and church and family cemeteries that have been "donated" to the taxpayers. I am sure ther are a handful of small privatley owned cemeteries that have been taken over by taxpayers. I am aware of Historic Springdale in Peoria IL that is close to that and it is a large historic cemetery. However, I have never heard of a "corporate" cemetery, using the term corporate to mean a cemetery owned by a multi-location corporation, being taken over by taxpayers. Please provide an example.
That's about the way it may well go. Taxpayers get stuck if they wish to keep their community neat and free of blight. Unfair as hell and one only needs to look back at the history of cemeteries to see how fast the promoters loose interest when the gravy is sucked off the top.
"Perpetual care" is a scam in a large number of cases bring totally inadequate to provide care in the future after the hot-dogs have left town. This sorry condition is not confined to the corporate cemeteries but carries over to those privately owned or perhaps some sponsored by religious organizations too. Cemetery care is a huge liability for future generations if they are to be maintained in a proper fashion.
ultimately, what do you think will happen to corporately-run cemeteries and mausoleums that run out of space? will they wind up being "donated" to municipalities and townships?
and what if a governmental body should refuse the "donation"? could we wind up with huge abandoned cemeteries and mausoleums in 50 years?
not a very pretty (future) memory picture, if you ask me.