Cal. Code Regs. Tit. 16, § 2334 - Unitrust Conversion Application

(a) A cemetery authority, its board of trustees, or its corporate trustee seeking to convert the cemetery authority's endowment care fund from a net income distribution method to a unitrust distribution method shall submit to the bureau a completed form 23-UCA (rev. 1/22), Unitrust Conversion Application, which is hereby incorporated by reference. Each application shall be accompanied by:

(1) The proposed endowment care fund trust instrument executed by the board of directors or limited liability company members of the cemetery authority;

(2) The trustee compensation schedule as referenced in Section 8726.2(b)(7)(B) of the Health and Safety Code;

(3) Written investment objectives that promote the mutual goals set forth in Section 8726.2(b)(1) of the Health and Safety Code;

(4) Evidence of how the cemetery authority, its board of trustees, or its corporate trustee will invest and manage the trust under the prudent investor rule as set forth in the Uniform Prudent Investor Act. Evidence shall be in the form of an analysis and shall include:

A. Current investment asset class allocation ranges, with explanations of the role(s) each class of investment plays in the overall portfolio strategy, and how the asset allocation will assist the trustee in managing the fund according to the prudent investor rule.

B. A five (5) year projection for the fund, by year, of anticipated income, expense, and valuation calculations adjusted for inflation and changes in asset values that identify and consider the following:

i. The projected value of the endowment care fund necessary to maintain the cemetery when it no longer has any interment space left to sell, if that condition is expected to occur before the end of the five (5) year projection.

ii. The reasonable administrative expenses attributable to generating income to the endowment care fund. "Reasonable administrative expenses" are the expenses identified in Section 8733 of the Health and Safety Code.

iii. The portion of expenses attributable to care, maintenance and embellishment of the cemetery expected to be paid by the endowment care fund.

iv. The projected contributions to the corpus from:

(1) sales of developed property categorized by quantity and type of interment space, including current deposit rates and any anticipated modification of the deposit rates; and

(2) sales of undeveloped property, if known and applicable.

v. The projected growth of the fund, with consideration of tax obligations.

vi. The projected annual unitrust amount.

(5) Policies or written procedures that identify any internal controls and reporting systems used by the trustee to manage the fund under the prudent investor rule.

(6) Written financial records showing a separately identifiable reserve account has been created for future maintenance, repair, restoration of property, or embellishments in the cemetery pursuant to Section 8726.2(b)(5) of the Health and Safety Code. The beginning balance of this reserve may include the prior year's ending balance of the Reserve for Future Maintenance under the net income distribution method.

(b) Provision of Relevant Trust Documents

(1) If all relevant trust documents including a proposed trust instrument are not available at the time of application, then the applicant shall include with the application an explanation for why the document(s) are not available and, if applicable, the date the document(s) are expected to become available. Any approval of the application without the relevant trust document(s) may be conditioned upon the applicant's provision of the relevant document(s) within thirty (30) days of the date when the applicant indicates the documents will become available. For the purposes of this section, "relevant trust documents" means all items listed in this section.

(2) If any relevant trust document(s) identified by the bureau in the notice of conditional approval is not provided within thirty (30) days of the date of when the documents become available, then the conditional approval shall be revoked and the application denied. The bureau shall send a notice of revocation of conditional approval and denial of the application to the applicant as set forth in Section 2334.2.

(c) A completed application pursuant to this section shall be submitted at least ninety (90) days prior to the beginning of the cemetery authority's reporting year for which the conversion is requested.

Notes

Cal. Code Regs. Tit. 16, § 2334

1. New article 3.5 (sections 2334-2334.4) and section filed 1-5-2022; operative 1-5-2022 pursuant to Government Code section 11343.4(b)(3) (Register 2022, No. 1).
2. Change without regulatory effect amending Unitrust Conversion Application form number 23-UCA (incorporated by reference) and amending subsection (a) filed 3-17-2022 pursuant to section 100, title 1, California Code of Regulations (Register 2022, No. 11).

Note: Authority cited: Section 7606, Business and Professions Code; and Section 8726.2, Health and Safety Code. Reference: Section 7653.6, Business and Professions Code; and Sections 8726, 8726.2, 8731, 8733.5, 8736, 8738, 8740, 8751 and 8751.1, Health and Safety Code.

1. New article 3.5 (sections 2334-2334.4) and section filed 1-5-2022; operative 1/5/2022 pursuant to Government Code section 11343.4(b)(3) (Register 2022, No. 1).
2. Change without regulatory effect amending Unitrust Conversion Application form number 23-UCA (incorporated by reference) and amending subsection (a) filed 3-17-2022 pursuant to section 100, title 1, California Code of Regulations (Register 2022, No. 11).