                                 CODE OF VIRGINIA

USE OF INCOME FROM PERPETUAL CARE TRUST FUND; DISTRIBUTIONS (§ 54.1-2322)

A. The income from the perpetual care trust fund shall be used solely and
exclusively for the general care, maintenance, administration, and embellishment
of the cemetery. Unless prior approval has been obtained from the Board or a
court of competent jurisdiction, the principal of the perpetual care trust fund
shall only be used for investment purposes.

B. A cemetery company may request the trustee of a perpetual care trust fund to
elect the distribution of either of the following from the perpetual care trust
fund:

   1. All net income, which for purposes of this section means the collected
   dividends, interest, and other income of the perpetual care trust fund less
   any taxes on income, fees, commissions, and costs. A distribution made under
   this subdivision shall be referred to as a &#8220;net income distribution
   method&#8221;; or

   2. An amount not to exceed five percent of the fair market value of the
   perpetual care trust fund at the close of its fiscal year preceding the
   distribution year. A distribution made under this subdivision shall be
   referred to as a &#8220;total return distribution method.&#8221;

C. A cemetery company may request the trustee of a perpetual care trust fund to
convert from a net income distribution method to a total return distribution
method by delivering written or electronic notice to the trustee. Notice of such
conversions shall be provided to the Board at least 90 days prior to
implementation of the total return distribution method. Such notices may be
written or electronic and shall include a copy of the trust instrument, election
of distribution method, and an investment and distribution policy pursuant to
subdivision D 1. In the event that a distribution method is not elected,
distributions shall be limited to the net income distribution method.

D. The trustee of a perpetual care trust fund may reject a cemetery
company&#8217;s request to elect a total return distribution method. If a
trustee determines that election of a total return distribution method is
proper, he shall:

   1. Prior to implementation of the total return distribution method, adopt a
   written investment and distribution policy under which the amounts of future
   distributions from the perpetual care trust fund will be calculated under the
   total return distribution method rather than net income distribution method.
   The investment goals and objectives of such policy shall be tailored to
   achieve (i) principal growth through equity investment; (ii) current income
   through income investment, as necessary; and (iii) an appropriate balance
   between (a) maintaining purchasing power through principal appreciation and
   (b) generating income to support the cemetery company&#8217;s care and
   maintenance. A copy of such policy shall be sent to the Board with the notice
   required in subsection C;

   2. Ensure that asset allocation under the perpetual care trust fund includes a
   diversified portfolio and that investment decisions are made in accordance
   with all other applicable laws of the Commonwealth;

   3. Determine the fair market value of the perpetual care trust fund at least
   annually using generally accepted valuation methods and such valuation date or
   dates or averages of valuation dates as are readily ascertainable;

   4. Make distributions from the perpetual care trust fund on a monthly,
   quarterly, semi-annual, or annual basis, as agreed upon by the cemetery
   company and the trustee;

   5. Require that both of the following tests be met each fiscal year prior to
   allowing any distribution from the perpetual care trust fund to the cemetery
   company: (i) the fair market value of the perpetual care trust fund after the
   distribution will be greater than the aggregate of 80 percent of the fair
   market value of the perpetual care trust fund at the close of the preceding
   fiscal year plus the total contributions made to the trust principal from such
   date to the date that the method of distribution is elected and (ii) beginning
   with the third year of using a total return distribution method, a three-year
   analysis of investment returns and distribution practices indicates that such
   practices will result in sufficient protection of the trust principal. If
   either test is not met, distributions for that fiscal year shall be limited to
   the net income distribution method;

   6. In the event that the taxes and fees paid by the perpetual care trust fund
   are greater than two and one-half percent of the fair market value of the
   trust at the close of the preceding fiscal year, reduce the distribution by
   the amount exceeding two and one-half percent; and

   7. Maintain records documenting the fair market value of the assets held in
   the perpetual care trust fund at the end of the accounting period immediately
   prior to conversion to the total return distribution method.

E. In addition to filing an annual perpetual care trust fund financial report
with the Board pursuant to &#xA7; 54.1-2324, a cemetery company that has elected
a total return distribution method shall also file a copy of such financial
report at the close of each fiscal year with the commissioner of accounts in a
jurisdiction in the Commonwealth in which the cemetery company owns a cemetery.
The commissioner of accounts shall review the financial report and forward his
finalized accounting to the Board, with all reasonable fees and costs for such
filing and review borne by the cemetery company. A trustee shall not make any
distribution from a perpetual care trust fund under a total return distribution
method until the review by the commissioner of accounts has been finalized. A
review shall be deemed finalized if the commissioner of accounts has not
responded or communicated any deficiencies within 60 days of the submission of
the financial report.

F. The Board shall review all notices of conversion or reversion of perpetual
care trust fund distribution method for compliance with this section. The Board
may engage the services of a professional to review notices of conversion or
reversion to a total return distribution method, with all reasonable costs of
such review borne by the cemetery company that submitted such notice.
			The Board may limit or prohibit conversion from a net income distribution
method to a total return distribution method if the trustee or any investment
manager is not able to demonstrate sufficient knowledge and expertise regarding
effective implementation of the total return distribution method. The Board may
prohibit a reversion from the total return distribution method to the net income
distribution method if the trust principal is less than it was at the time the
cemetery company converted to the total return distribution method, as adjusted
for inflation.
			If a conversion to the total return distribution method has already been
made, the Board may limit or prohibit distributions from the perpetual care
trust fund if the trustee or any investment manager is not able to demonstrate
sufficient knowledge and expertise regarding the distribution of trust income
for the maintenance of the cemetery using the total return distribution method.
In deciding whether a distribution should be limited or prohibited, the Board
shall consider the presence and stated value of trust assets that do not have an
active market and are not traded on a regular basis, the frequency of appraisals
and evaluations of such assets, the asset allocation of the trust, and whether
trust principal, as adjusted for inflation, is less than it was at the time the
cemetery company converted to the total return distribution method.
			The Board may require a cemetery company to restore a distribution to the
perpetual care trust fund if (i) the distribution and all other aspects of the
trust were not in compliance with the requirements of this section at the time
such distribution was made or (ii) the cemetery company has committed fraud
against the trust.

G. If a total return distribution method has been elected, the perpetual care
trust fund may not be reverted to a net income distribution method absent
approval by the Board. A failure by a cemetery company to file a perpetual care
trust fund financial report annually with the Board as required by &#xA7;
54.1-2324 shall automatically prohibit a conversion to or continuation of a
total return distribution method pending further action by the Board.

H. No portion of the perpetual care trust fund shall be used to pay any personal
obligation or debt of any officer or owner of the cemetery or any tax obligation
incurred by the cemetery or for any purpose other than that expressly described
in this section. Nothing in this section shall be construed to limit the ability
of the perpetual care trust fund trustee from paying normal operating expenses
and income taxes of the trust itself, the trust being a separate legal entity.

HISTORY: 1998, cc. 708, 721; 2004, c. 192; 2012, c. 355; 2017, cc. 12, 65.