How Important Are Perpetual Care Funds for Cemeteries?

Perpetual care funds are monies placed in trust by cemeteries to generate income to cover cemetery maintenance in perpetuity. The funds are derived from sales of grave sites, above-ground crypts, and niches in mausoleums and columbariums. Cemeteries usually add 5-15% to the price charged for these items for perpetual care, so sales margins are not affected.

Many states require that cemeteries establish a perpetual care or endowment care trust. This requirement was established in response to situations where cemeteries fell into disrepair or were abandoned with no funds left for maintenance and upkeep.

With a perpetual care trust, a third-party trustee is responsible for oversight of the trust and its investments. The trustee hires an accounting firm to audit the trust and provides the necessary reports and tax filings to maintain its good standing.

Perpetual care funds are very important for cemeteries for a number of reasons.

Maintenance Costs

Maintenance costs are a significant portion of most cemeteries operating budgets. The costs include grounds keeping, road repairs and general maintenance and upkeep of cemetery infrastructure. Cemetery maintenance does not usually cover upkeep or repair of monuments, headstones and grave markers.

Cemeteries receive the income generated by perpetual care trusts to help offset the cost of maintenance. Without the income from perpetual care trusts it would be very difficult for cemeteries to cover the cost of maintenance from current operating revenue. This is especially true for cemeteries that have sold out and are closed to additional interments.

In some cases, cemeteries have tried billing families annually for maintenance, but this is a costly process and over time becomes impractical as relatives pass away. Perpetual care funds are a much better solution to covering maintenance costs over the long term.

Demographics

Fortunately, people are living longer. However, as a result, the need for death care services is being delayed beyond the time expected by many cemeteries which opened well before life expectancies improved considerably. If cemeteries relied on current revenue to cover the costs of maintenance, the slower revenue growth resulting from longer life spans would present a difficult challenge.

Income from perpetual care trusts provides the certainty of funding needed to survive changes in demographic factors.

Market Trends

Changes in market trends like demographics can have a profound impact on the ability of cemeteries to provide adequate maintenance without income from perpetual care funds. The growing trends in cremations and lower spending on death care services is impacting sales of higher value grave sites and accessories such as caskets and burial vaults.

Cemeteries need the reliability of income from perpetual care trusts to ensure adequate maintenance in the long run.

Marketing Tool

Images of overgrown and abandoned cemeteries can be deterrents to choosing traditional interment in a grave and the accompanying graveside services, caskets, and burial vaults; all of which are significant sources of revenue for cemeteries.

Perpetual care can be an important marketing tool for cemeteries to assure pre-need customers and at-need families that cemetery grounds will be maintained in perpetuity. Providing this assurance can help to increase the choice of traditional interment.

Cemeteries are required to use a perpetual care trust in many states to ensure that maintenance is provided over the long run. More importantly, cemeteries need the reliability of the income from perpetual care trusts to provide adequate maintenance regardless of current operating revenues and changes in demographics and market trends. Cemeteries can also use perpetual care as a marketing tool to promote choice of higher value traditional death services.

About MKS&H: McLean, Koehler, Sparks & Hammond (MKS&H) is a professional service firm with offices in Hunt Valley and Frederick. MKS&H helps owners and organizational leaders become more successful by putting complex financial data into truly meaningful context. But deeper than dollars and data, our focus is on developing an understanding of you, your culture, and your business goals. This approach enables our clients to achieve their greatest potential.

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