What Is a Perpetual Care Fund?

A perpetual care fund (also called endowment, trust, or maintenance fund) is a segregated account that grows indefinitely to finance cemetery grounds maintenance in perpetuity. When a family purchases a burial plot, the funeral home or cemetery must contribute a percentage of the sale price to this fund. The fund is invested conservatively, and only investment income (not principal) is used for annual grounds maintenance.

Key principle: Perpetual care funds are NOT your operating money. They belong to the deceased and their families forever. Commingling these funds with operating accounts is fraud.

State-Specific Contribution Requirements

Contribution percentages vary significantly by state. Most states require 10-25% of plot sale price; some states are as high as 50%. Always verify your state's specific requirement:

• California: 8-10% of plot sale price
• New York: 50% of plot sale price (highest in nation)
• Texas: 10-20% depending on cemetery type
• Florida: 5-10% for private cemeteries
• Illinois: 10-15% of sale price
• Ohio: 10% of sale price

Action: Contact your state cemetery board or funeral regulatory agency to confirm your exact requirement. Document it in writing.

Segregation & Account Management

Core Requirements

• Separate bank account(s) from operating funds
• Dedicated accounting ledger or accounting system designation
• Clear documentation that funds belong to families (in perpetuity)
• Investment account with conservative allocation (bonds, money market)

Common Segregation Models

Model 1: Single Fund Account (Small cemeteries)

• One dedicated bank account for all perpetual care contributions
• Easier to manage; easier to audit
• Works for cemeteries with 100-500 plots

Model 2: Trust with Corporate Trustee (Medium-large cemeteries)

• Fund held by bank or trust company (not by funeral home directly)
• Eliminates personal liability; professional management
• Annual trustee fees (0.5-1% of fund balance)
• Recommended for cemeteries with $500,000+ in perpetual care funds

Investment Strategy & Performance Tracking

Conservative Investment Allocation

Perpetual care funds must be invested for long-term stability, not growth. State regulators restrict high-risk investments (stocks, commodities). Recommended allocation:

• 50-60%: U.S. Treasury bonds and high-quality municipal bonds
• 20-30%: Investment-grade corporate bonds
• 10-20%: Money market or short-term CDs
• 5-10%: Dividend-paying blue-chip stocks (optional, lower-risk)

Performance Benchmarking

Track fund performance annually to ensure it's growing adequately. Target: 3-5% annual return (conservative). If underperforming, consider adjusting investment allocation or consulting with a financial advisor.

Calculation: Beginning balance + Contributions + Investment income - Maintenance expenses = Ending balance

Using Perpetual Care Fund for Maintenance

Only investment INCOME should be spent. Principal must remain untouched. This ensures the fund grows indefinitely to cover future maintenance. Annual maintenance budget is typically 50-75% of the fund's investment income.

Example: Fund balance $500,000; conservative 4% annual return = $20,000 income. Spend $15,000 on maintenance; retain $5,000 to buffer against market volatility.

State Audit & Compliance Review

Most states require annual audit or periodic compliance review. Prepare documentation:

• Complete list of all plot sales (date, price, contribution calculated)
• Bank statements showing deposit of contributions
• Investment statements showing fund balance and performance
• Maintenance expense documentation (invoices, receipts)
• Proof of segregation (separate account, accounting designation)
• Annual financial statement reconciliation

Common Perpetual Care Fund Mistakes

Mistake 1: Commingling Funds

Treating perpetual care contributions as operating money. This is the #1 violation. Separate accounts immediately if commingled.

Mistake 2: Incorrect Contribution Calculation

Contributing too little (saving money in the short term but creating audit liability). Always verify your state's requirement and document the calculation on every transaction.

Mistake 3: High-Risk Investments

Investing in stocks, cryptocurrency, or speculative assets. States regulate this strictly. Conservative bonds are safer and compliant.

Mistake 4: Raiding the Fund for Operating Expenses

Drawing from perpetual care funds during cash flow shortages. This violates state law and triggers audit liability. Maintain separate operating capital.

Audit Preparation Checklist

• Reconcile perpetual care account balances to general ledger monthly
• Document every plot sale with date, price, and contribution amount
• Maintain organized file of bank statements (3 years minimum)
• Keep investment statements and performance reports
• Retain all maintenance expense receipts and invoices
• Prepare annual reconciliation statement (beginning balance + contributions + income - expenses = ending balance)
• Review state compliance requirements annually

Resolving Non-Compliance Issues

If you discover perpetual care fund violations (commingled funds, incorrect contributions, missing records), address immediately:

1. Consult with your funeral home CPA or attorney
2. Calculate total restitution owed (corrected contributions plus interest)
3. Voluntarily disclose to state regulator (often results in lighter penalties than discovered violations)
4. Develop corrective action plan
5. Implement segregated account and accounting procedures immediately

Related Cemetery Articles

Simplify Perpetual Care Fund Accounting

Perpetual care fund compliance doesn't require complex spreadsheets or manual tracking. Digital systems automatically calculate contributions based on plot sales, segregate funds, track investment performance, and generate audit-ready reports. Sacred Grounds integrates perpetual care fund tracking directly into your cemetery operations workflow, eliminating manual calculation errors and compliance gaps.

Take control of perpetual care compliance today. Start with Sacred Grounds free trial—no credit card required.