(A)(1) All payments of money made to a person upon an agreement or contract or a series or combination of agreements or contracts, but not including the furnishing of cemetery lots, crypts, niches, mausoleums, grave markers, or monuments, which has for a purpose the furnishing or performance of funeral services or the furnishing or delivery of personal property, merchandise, or services of any nature in connection with the final disposition of a dead human body, to be furnished or delivered at a time determinable by the death of the person whose body is to be disposed of, are held to be trust funds.

(2) When a vault is sold preneed by a seller in accordance with this chapter, one hundred percent of funds received by the seller at the time of payment must be held as trust funds and deposited in a financial institution.

(3) The provider receiving the payments is declared to be a trustee of the payments, and shall deposit the payments in a financial institution. All of the interest, dividends, increases, or accretions of whatever nature earned by the funds deposited in a trust account must remain with the principal of the account and become a part of it, subject to all of the regulations concerning the principal of the fund contained in this section. After the death of the beneficiary, the principal and all accrued earnings must be applied to the cost in effect at the time of death of the services and merchandise specified in the contract. A shortfall in the funds must be paid by the next of kin or the estate of the beneficiary and any excess must be refunded to the estate of the beneficiary. All taxes on the fund must be paid in accordance with the Internal Revenue Code and applicable rules and regulations.

(B) The provider may enter into a contract and guarantee to provide services and merchandise in accordance with a preneed funeral contract in the future at no additional cost to the purchaser when the full contract price amount is paid to the provider. After the death of the beneficiary of a guaranteed-price contract, the principal and all accrued earnings must be paid to the provider to cover the costs in effect at the time of death of the services and merchandise specified in the contract.

(C) All payments made under the agreement, contract, or plan remain trust funds with the financial institution until the death of the beneficiary and until the delivery of all merchandise and full performance of all services called for by the agreement, contract, or plan, unless payment is made pursuant to § 32-7-30.

(D) The funds must not be paid by the financial institution until a certified death certificate and a certified statement that all of the terms and conditions of the agreements have been fully performed are furnished by the provider to the financial institution. The provider has no obligation to deliver merchandise or perform a service unless payment in full has been deposited in the financial institution. An amount deposited which is not payment in full may be credited against the cost of merchandise or services contracted for by representatives of the deceased. A balance remaining in the fund after the payment for the merchandise and services as provided in the agreement, contract, or plan must be paid to the estate of the beneficiary of the agreement, contract, or plan pursuant to subsection (A) or paid to the provider of a contract pursuant to subsection (B).

(E) Subsections (A), (B), (C), and (D) do not apply to contracts for funeral services or merchandise funded by insurance policies that are otherwise regulated by law; however, § 38-55-330 governs the conduct of a licensed funeral director employed by a licensed funeral home in South Carolina, who also is licensed as an agent for a life insurer doing business in this State, except a licensed funeral director employed by a licensed funeral home owned by a company not chartered in the United States.

(F) The department shall approve forms for preneed funeral contracts. All contracts must be in writing, and a contract form must not be used without prior approval of the department. The use or attempted use of an oral preneed funeral contract or a written preneed funeral contract in a form not approved by the department is a violation of this chapter by the person selling services or merchandise under its provisions; except that minor modifications to a contract form furnished or approved by the department do not invalidate the contract.

(G) All contracts must contain the name and Funeral Service License Number of the provider and seller.

(H) All funds received by the provider pursuant to the provisions of a contract governed by this chapter must be placed in trust in a federally insured account. The trustee may establish an individual trust for each contract or a common trust fund may be established with a financial institution that would maintain accounting for each individual deposit and furnish a quarterly report to the provider. The trust accounts must be carried in the name of the provider but accounting records must be maintained showing the amounts deposited and invested, and interest, dividends, increases, and accretions earned on them, with respect to each purchaser’s contract. The trustee has the authority to transfer trust funds from one financial institution to another, except that the trustee must notify the purchaser, or the beneficiary of a deceased purchaser, within thirty days after the transfer.

(I) All earnings accrue to the trust except that the provider may withdraw ten percent of the annual earnings of the trust to cover trust administration.

(J) Preneed trust funds or earnings must not be used as collateral, pledged, or in any way encumbered or placed at risk.

(K) If the purchaser fails to make payments as provided in the contract, the contract is voidable at the option of the provider and he may retain ten percent of the amount paid on the contract as a fee and return the remaining funds to the purchaser.

(L) If the merchandise selected is not available at the time of need, the provider shall make available merchandise of equal or greater value to the purchaser or his representative. The purchaser or his representative is entitled to approve a substitution.