Amends TCA Title 35, Chapter 14 and Title 46, Chapter 1, Part 2.

Present law requires cemetery companies to establish and forever maintain an improvement care trust fund to provide for the improvement, care, and maintenance of: (1) Each separate cemetery; (2) Each separate geographical location of each cemetery owned and operated by the cemetery company; and (3) Each separate geographical location of a funeral home, or other individual or entity, that has niches or other areas or devices of interment for sale, lease, or rent. Present law requires that a cemetery company establish its improvement care trust fund with a trust company, bank, or insured savings and loan association, but authorizes cemetery companies to change trustees subject to 30 days' advance notice and the approval of the commissioner of commerce and insurance. This bill authorizes the trustee for an improvement care trust to establish an improvement care trust fund for each individual cemetery company or a master improvement care trust fund to hold the funds for multiple cemetery companies based in this state. This bill requires the trustee for an improvement care trust to: (1) Comply with the Tennessee Uniform Prudent Investor Act of 2002, except that the provision of the Act allowing modifications to the prudent investor rule by the terms of the trust agreement will not apply; (2) Provide an annual financial report concerning the trust to the department of commerce and insurance; and (3) Make accounting records for the trust available to the comptroller of the treasury and the department, upon request, for review and audit. If the trustee uses a board for the management of an improvement care trust, then this bill requires the trustee to maintain insurance on behalf of each board member against liability asserted against or incurred by the board member in that capacity. Present law requires that the net earnings of each improvement care trust fund are used only for the improvement care of the cemetery or separate geographical location of the cemetery for which the fund was established. Under present law, the net earnings for an improvement care trust fund are: (1) All net income, excluding capital gains; or (2) An amount not exceeding 5 percent of the fair market value of the trust as of the last day of the trust fiscal year immediately preceding the distribution year. This amount is not reduced by taxes or fees, unless the fees exceed 2.5 percent of the market value of the trust as of the last day of the trust fiscal year immediately preceding the distribution year. If any fees exceed 2.5 percent of the market value of the trust as of the last day of the preceding fiscal year, then the amount of the disbursement must be reduced by the excess. This bill changes the formula for calculating net earnings under (2) to an amount not exceeding 5 percent of the fair market value of the trust, averaged over the lesser of the balance as of the last day of the trust fiscal year immediately preceding the distribution year and the two preceding years or, if less than two years, the period of time the trust has been in existence. If the earnings are part of a master improvement care trust, then only the fair market value of the cemetery company's portion of the trust must be used. The requirements for deduction of fees in excess of 2.5 percent of the trust's market value are unchanged under this bill. Under present law, a pre-need sales contract for cemetery merchandise and services is enforceable against the purchaser, only if: (1) The seller is a cemetery company owning or operating a duly registered cemetery under this chapter; and (2) The seller, subject to certain requirements specified in present law, deposits an amount equal to the procurement costs of the cemetery merchandise and services identified in the sales contract, plus 20 percent of the costs, in a special general fund trust account in a state or national bank authorized by law to administer trust funds. Present law requires the establishment of a separate general trust account for each cemetery owned or operated by a cemetery company, and that each account bear the additional legend, "pre-need merchandise and services trust account." This bill replaces the requirement that a separate general trust account be established for each cemetery and instead authorizes a trustee establishing a general trust account for deposits associated with a pre-need contract to establish: (1) A separate trust fund for each pre-need cemetery contract; (2) A single trust fund for all pre-need cemetery contracts written by an individual cemetery; or (3) A single master trust fund for all pre-need cemetery contracts written by multiple cemetery companies based in Tennessee, which identifies the subaccounts for each individual participating cemetery company trust. This bill requires a trustee managing a trust established for pre-need contracts to: (1) Comply with the Tennessee Uniform Prudent Investor Act of 2002, except that the provision of the Act allowing modifications to the prudent investor rule by the terms of the trust agreement will not apply; and (2) Make accounting records for the trust available to the comptroller of the treasury and the department, upon request, for review and audit. If the trustee uses a board for the management of a pre-need contract trust, then this bill requires the trustee to maintain insurance on behalf of each board member against liability asserted against or incurred by the board member in that capacity. This bill takes effect upon becoming a law for rulemaking purposes and January 1, 2023, for all other purposes.