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When Sorry Doesn’t Cut It: Mishandling of Prearranged Funeral Funds

In 2014, the Rude Family Northwest Mortuary, located in Phoenix, Arizona, closed its doors for the last time. Over the years, the funeral home and its owner Steve Rude had developed close relationships with members of the community. When planning for her own funeral, Edith Garrity relied on Rude’s reputation—the two were members of the same church—in deciding to purchase a prearranged funeral contract from the Rude Family Northwest Mortuary. It was Garrity’s understanding that the $4,600 she paid to Rude would be held in a trust until her death. For Garrity and her family, “the thought of having that prepaid trust [was] calming.”

Their faith in Rude was not unreasonable. As does many other states, Arizona requires that “prearranged funeral agreement[s] . . . be funded by insurance or trust,” Ariz. Rev. Stat. Ann. § 32-1391.02(C), to ensure the funds are available upon the beneficiary’s death. To that end, “[a] funeral establishment or another person shall not withdraw, transfer, remove, commingle, encumber or use as collateral any monies paid to the establishment under a prearranged funeral agreement funded by trust.” Id. at 32-1391.02(C)(2). Thus, the closure of Rude’s funeral home should have had no impact on the $4,600 Garrity assumed had been placed in a trust and would be available upon her death.

But it did, and she was not alone. Following the mortuary’s closure, “state funeral board investigators say more than $112,000 was missing from more than 44 prepaid funeral trusts.” When confronted, Rude admitted that while he commingled the funds intended for trusts with the funeral home’s general expenses, he never put them to personal use. Rude also acknowledged that he did not possess the license required to collect prearranged funeral contract payments, a violation of § 32-1391.02. Rudy Thomas, the executive director of the Arizona Board of Funeral Directors and Embalmers, characterized Rude’s conduct as fraud.

In 2014, Rude promised that he would “make things right.” However, as of October 2016, Rude had paid back only $14,000. Although the matter was turned over to the Arizona’s Attorney General’s office, no charges have yet been filed. Arizona’s statutes governing prearranged funeral agreements are meant to protect individuals like Edith Garrity from fraud like that perpetrated by Steve Rude. But for such safeguards to be effective, enforcement is necessary. For Garrity and the countless other individuals whose end-of-life plans have been disrupted by Rude’s misconduct, sorry doesn’t cut it.

Mickey Herman

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