Business

Funeral regulations protect consumers with preneed contracts

Although Thos. Shepherd & Son has been shut down since November, state funeral services regulators say North Carolina law protects consumers’ rights to transfer preneed contracts.

By Bill Moss, Published: January 22, 2021

Shut down since mid-November for violations of state regulations, Thos. Shepherd & Son has been unable to conduct funeral services, burials or cremations.

But those who have preneed contracts with the more than 100-year-old business should be able to transfer any prepaid contract to another funeral home, state regulators say.

The Board of Funeral Services ordered the Church Street funeral home to shut down after an inspection last summer turned up numerous violations of state regulations.

In a series of regulatory actions dating to 2018, state board inspectors have investigated at least six consumer complaints against the funeral home and its crematory, which are owned by Thomas R. “Tom” Shepherd, the licensed funeral director, and his wife, Melody Shepherd.

The state board issued a show-cause order on Oct. 29 alleging numerous violations. The funeral home responded five days later that Tom Shepherd had been experiencing health issues and was “not currently competent to address violations” spelled out in the show-cause order. The next day the state board issued the order for summary suspension of the funeral home’s license, its crematory permit at Shepherd Memorial Park, Tom Shepherd’s funeral director license and Melody Shepherd’s crematory manager permit and ordered the business to stop performing funeral services immediately. The state board upheld the suspension on Nov. 18. A hearing on the violations alleged in the show-cause order is expected to be scheduled in the coming weeks.

Families can purchase preneed contracts — paying for obituary writing, visitations, funeral services, burials and cremations in advance — through insurance policies or cash payments that are held in trust.

“Either one of those would make a preneed contract in the state of North Carolina and would be subject to regulation by our Board of Funeral Services,” Brett Lisenbee, compliance officer for the board, said in an interview.

A full funeral service with a burial can cost $5,000 or more and cremations generally run less than that. The enforcement team of the regulatory board investigates cases of everything from unlicensed services to missing money.

“There was a case in Cliffside in excess of $300,000 missing,” Lisenbee said. “The funeral home was shut down and the case was referred to the local district attorney in Rutherford and that licensee was sentenced to four years in prison.”

The Board of Funeral Services has made no criminal referral in the Shepherd case and Lisenbee said he’s not aware of any allegations of missing money.

Even if Thos. Shepherd & Son was not subject to a summary suspension, preneed contracts are “100 percent” transferrable in North Carolina, “which means that a consumer or beneficiary can transfer them to any funeral home they want to as many times as they want to prior to death,” he said. “The money follows the consumer. If it was an at-need situation and death had occurred, they would just select the alternative funeral home and the board would work with that funeral home to ensure they had the information they needed to make a claim on the policy or the trust account where the money has been paid for that person’s services.”

Such transfers are not uncommon. If the consumer needs to change to a different company, funeral directors are “pretty familiar with how things operate.” Plus, safeguards are in place. “When that preneed contract is first sold, whether it’s a trust or insurance, they’re required by law to file a copy of that contract with our board,” Lisenbee said. “So we have a copy of that contract as it was executed and the funding source.” If a family that had paid in advance for services at Shepherd decided to switch to a different provider in Hendersonville, “then that funeral home would most likely call our office to get a copy of that contract.”

The Board of Funeral Services also has a form on its website consumers can use to request a copy of a preneed contract “even if they’re not going to go to a new funeral home.”

“The money and their contracts are safe,” Lisenbee said when asked what he would want consumers to know. “The board has a preneed recovery fund that’s in place to reimburse any person that would have actually lost money. I don’t believe we have any evidence to suggest there’s missing money right now, but if there were we do have that preneed recovery fund in place to assist consumers who find themselves in that situation. The main thing is if they have questions about their contract, make sure it was filed with our office.”

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For more information or to get a copy of a preneed contract visit ncbfs.org or call 919-733-9380.