Wealth Insights

Business growth strategies for cemeteries

Many cemeteries are challenged by cash flow constraints. Learn how you can increase your income with marketing and financial solutions.

“How can I receive more income from my trust?” is a frequently asked question from cemetery owners regarding their perpetual care and merchandise trusts. As cemetery owners know, trusts are required to comply with specific state laws and are examined by state regulators who guide how trust funds can be invested and income distributed. But there are actions a cemetery owner and their trustee can take to help increase the cash distributed from trusts.

The cash flow challenge for cemetery owners

It is easy to understand the need to increase cash distributions from a trust. While low interest rates a few years ago reduced the amount of income trust investments earned and were ultimately distributed, today’s challenge for cemetery owners is inflation and increasing labor costs.

Merchandise, services, supplies, and labor costs have increased rapidly. The dollars received from a trust don’t buy what they used to.

Add in the continued increase of cremation to the situation and cemetery owners see the results in their bottom line. Around 62% of Americans today choose cremation, compared with 33% who select traditional casket burials.¹

All of these trends put a huge strain on the budgets of cemeteries. “Fortunately, today’s short- and long-term interest rates have rebounded, which helps drive income back to the cemetery owner,” says David Falconer, Senior Vice President, Funeral and Cemetery Trust Division Manager at Regions Bank. “But interest rates are just one component of driving cash flow from a trust back to the cemetery. How the trust is invested and what statutory elections are made for the trust likely have an even bigger impact on trust distributions.”

Adjusting investment strategies

“Of all the changes that cemetery owners can pursue to try to build cash flow, the one that will likely have the most impact is to make adjustments to the way that your trust assets create distributions to the cemetery,” says Falconer.

If you decide to try this strategy, you have two options:

1. Adopting a total-return (or unit trust) approach.

   This method allows cemetery owners to distribute a fixed percentage of the trust’s overall value each year — typically 3% to 5% — rather than investment income only. It may also allow for more flexibility in how the assets are invested, as long as it’s permitted by the trust. To date, 18 states have adopted Unitrust distribution rules for cemetery trusts.

2. Reconsidering capital gains.

   This approach allows cemetery owners to count gains from the sale of equity investments, including stocks, as income rather than as additional funds to add to the trust principal.

Both approaches require revising your trust documents — and the definitions of what “income” can be — and getting the change approved in states with favorable trust laws. “If your state allows the change, the annual income you have available for operations, maintenance, hiring, marketing and growing the business could increase substantially,” Falconer explains.

Offering new ways to meet consumer needs

To add to the extra income that trust changes can produce, Falconer also suggests adding to the trust “corpus” by introducing new products and services that can produce alternate streams of income going forward. Those efforts may also include forging relationships with local funeral homes and churches to make sure they are aware of your products and services.

Implementing new operational and marketing strategies may help encourage customers to buy cemetery property for the future. Funeral operators are likely to sell their services on a “preneed” basis while many cemeteries continue to rely only on “at need” opportunities. Creating a marketing plan and outreach program to inform families that they can preplan for items at a cemetery can create new income.

“Cemeteries are definitely changing their offerings, so as cremations continue to increase, there are many more options for memorializing the remains of loved ones,” says Jenny Crespo, Vice President and Relationship Consultant, Funeral and Cemetery Trust Division at Regions Bank. Crespo is a licensed funeral director and managed a large combination location prior to joining Regions.

These services can give families a place to go to memorialize their loved ones on a birthday, anniversary or holiday. “While cremation has changed the requirements for burial and the sequence of events, it’s still human nature to go through a grieving process,” Crespo explains. That’s why it’s critically important for cemetery owners to educate families about their offerings that can help memorialize and pay tribute to their loved ones.

Guidance for cemetery owners

Remember, whatever your customers decide to do, 10% to 15% of the property they purchase will go into the cemetery trust for future maintenance, so your efforts help to build the trust principal. In turn, that should increase the amount of money that is distributed from the trust for upkeep and maintenance of the cemetery.

Regions Funeral and Cemetery Trust Services is a dedicated business division that focuses solely on funeral and cemetery trust needs throughout the country. Learn more about our services and capabilities by visiting this link.

Source:
¹National Funeral Directors Association. “Statistics,” September 2024.