If you own a cemetery that sells pre-need contracts, you are familiar with the regulations that require you to place the funds into a trust. But did you know that several states allow you to distribute any surplus from the trust to your business? The regulations, which differ by state, refer to this situation as “excess income within the trust.”
Proper accounting of pre-need contracts for financial reporting often clouds the picture of the operations of a cemetery. Typically, management needs to review other metrics, such as cash flow, pre-need, sales volume, and call volume, to assess the true health of the business. An excess income audit could let you know if an excess income distribution is an option to alleviate your cash flow constraints. Or, it could be useful if you have plans to expand by acquiring another property or building a new mausoleum, by letting you know if you have the funds for these investments.