There are many alternatives to taking out a funeral insurance policy to pay for your last big expense in this world. One such alternative is a funeral bond.
These bonds are available from friendly societies, life insurance companies and some funeral directors. A funeral bond is like a managed fund except it can only be paid out upon the death of the owner. You
cannot access the money earlier. The upside is that like other managed investments, it earns interest until you need it.
As investments, funeral bonds are assessed under the Centrelink assets test, which means your share of the value (plus interest) is included in your assessable assets and is deemed to be earning income under the deeming rules.
To be exempt from the assets test:
- the bond must not exceed the Funeral Bond Allowable Limit (FBAL), which is currently $12,500 indexed annually on 1 July, and
- there are no prepaid funeral expense arrangements in place.
Some advantages of a funeral bond
- The proceeds are paid out tax-free.
- Your family can choose any funeral
- You can invest in two bonds which
still qualify for exemption from the
Centrelink assets test provided they
fall below the FBAL.
- Some bonds have extra benefits
such as providing for transporting
your body home if you die overseas
It’s wise to check the conditions of each funeral bond. For instance, some bonds will pay the full balance on death and others will only pay the actual amount required for the funeral, which means that any excess is retained.
As with any financial product, consider all your financial circumstances and if you have any questions please always feel welcome to contact us at any time.
Sources: Department of Human Services www.humanservices.gov.au Funeral bonds and prepaid funerals
General Advice Disclaimer
This article contains general advice only, which has been prepared without taking into account the objectives, financial situation or needs of any person. You should, therefore, consider the appropriateness of the information in light of your own objectives, financial situation or needs and read all relevant Product Disclosure Statements before acting on the information. Whilst every care has been taken to ensure the accuracy of the material, Paradigm Strategic Planning or WealthSure Financial Services Pty Ltd will not bear responsibility or liability for any action taken by any person, persons or organisation on the purported basis of information contained herein. Without limiting the generality of the foregoing, no person, persons or organisation should invest monies or take action on reliance of the material contained herein but instead should satisfy themselves independently of the appropriateness of such action.