In the current low interest rate environment, cemetery trusts may be struggling to generate enough income to cover the cemetery’s maintenance and care expenses. In recent years, there have been legislative changes in Indiana to address, in part, this issue. One of those changes is that the Indiana Code now allows a perpetual cemetery trust to be converted to a total return unitrust, pursuant to Ind. Code § 23-14-48-2.6 and Ind. Code ch. 30-2-15.
The conversion to a unitrust would enable a cemetery to receive a fixed percentage (between 3% to 5%) of the net fair market value of the Trust for the maintenance and care expenses of the cemetery. The conversion would also enable more aggressive investment opportunities for the Trust (as the Trustee would not have to focus as much on income producing investments but could focus on overall growth of the assets). The statute allowing for the conversion does, however, put some restrictions on distributions, and there are some general risks of a total return unitrust that should be considered in determining whether a conversion is a good option for the cemetery trust.
If a cemetery trust wants to convert the trust to a total return unitrust, there are two paths:
(1) pursuant to Ind. Code § 30-2-15-10(a)(2), the trustee may convert the trust, without the approval of the court, if the owner of the cemetery directs the trustee to take the action or consents to the action or
(2) pursuant to Ind Code §§ 30-2-15-11, 13, a petition to docket the trust can be filed with the court, and it can be requested that the court approve the conversion. The statute provides that if the court finds that the conversion would enable the trustee to better carry out the perpetual care of the cemetery, then the court shall approve the conversion.
If you would like to discuss whether a conversion to a total return unitrust may benefit your cemetery trust, contact the experienced attorneys at Slotegraaf Niehoff, P.C.