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Can you pre-plan or pre-pay for your funeral?

Did you know that you can prepare, plan and prepay for your funeral with a funeral home of your choice? Having done so you can choose how to pay for it in full or in instalments.

The benefits:

  • Taking the burden and responsibility from each other, family and/or friends.
  • You can, each, make your wishes known and arrange what you want. You can determine whether you want a burial or cremation, a traditional funeral service or a celebration of life.
  • Potentially save money.
    • You can potentially reduce the upfront costs and financial burden when you prearrange your funeral and pay costs in advance.
    • Prices for funerals can go up over time, but pre-planning means you can secure today’s price, giving peace of mind to you and your family and safeguarding from unexpected costs.
    • This potential saving however needs to be offset with the opportunity costs lost of withdrawing money from investments that would otherwise make a return that exceeds the increasing costs. Otherwise, the benefits above may outweigh any potential cost saving if more important to you.

Things to consider

  • Whether or not you want a traditional funeral, choosing where to host the funeral is an important wish that should be honored. However, wherever you choose to have the funeral, you’ll then need to be specific about music, religious guidelines, additional services and if you want your body to be present.
  • Burial vs cremation – If your preference is burial, you’ll need to research casket options. These days, you can even get earth-friendly caskets that can be decorated and personalised to celebrate a life well-lived. Or you can choose from different types of cremation.

 

Centrelink treatment/benefits

  • Prepaid funerals, burials plots and funeral bonds are Centrelink/DVA asset test exempt up to $15,000 per person and therefore an effective way of reducing your assessable assets if needed.

 

Options for prearranging a funeral

In Australia, there are three options for prearranging a funeral. These include prepaid funerals, funeral insurance and funeral bonds. Here are the major differences between the three options

  • Prepaid funeral – A prepaid funeral is a contractual agreement between you and a funeral home or funeral service provider, potentially saving money in the long term by locking in a price. The arrangement requires you to make a lump-sum payment or instalments that cover the cost of your funeral service in the future. Then, when the time comes, the money pays for your funeral. With this option, you can lock in a price and typically save money over the long term. They can offer fixed costs, preplanning options, and exemption from assets tests. They also often come with flexible payment options, including instalments, and a cooling-off period in case you change your mind.

A key consideration for this option is whether the increasing costs of a funeral medium to longer term is more than return on investment if you were to keep your funds invested.

  • Funeral insurance – Funeral insurance helps meet unexpected funeral costs by providing payment to assist with funeral expenses. However, depending on the provider, policies typically only cover accidental death in the first 12 months, and premiums can go up as you age. Therefore, it’s important to read the fine print before committing. This option provides a lump sum payment to assist with funeral expenses. The monthly cost typically ranges between $50 to $100, varying based on factors such as age, gender, health, and coverage amount. However, it poses risks such as rising premiums over time and limited coverage for terminal illness.
  • Funeral Bonds – Funeral bonds are an investment that enables an individual to accumulate funds to meet future funeral expenses. Investing in a funeral bond is similar to life insurance, whereby the benefit is payable on death. However, it’s also important to note that, unlike a prepaid funeral, the funeral bond goes towards the funeral expense but does not guarantee full coverage.

How to arrange a prepaid funeral

Arranging a prepaid funeral involves a few key steps. You’ll want to select a funeral director first. Look for someone who understands your wishes, you can trust, and fits your budget. Shop around if necessary. It’s important to get a clear breakdown of fees to avoid any surprises later on.

Once you’ve chosen a funeral director, it’s time to decide on the type of funeral you want. Involving family members in this decision can be helpful for everyone involved. This way, you can ensure the service reflects your personality and your wishes. Planning ahead not only lets you personalise your own funeral but also eases any burden on each other, friends, family and loved ones.

Lastly, consider your payment options. Many funeral directors offer flexible plans, whether upfront or in instalments. This ensures that prepaid funerals are accessible to everyone while providing the security of a locked-in price.

Final thoughts

Learning how to preplan your funeral in Australia can help ensure your wishes are known. In addition, you can help ease an emotionally turbulent time for your loved ones and save the financial hardship of funeral expenses for your family.

 

Written by David Rodgers, Senior Financial Adviser at Treysta Wealth.

 

Disclaimer: any information we share is general in nature and does not take into account your personal situation. You should consider if the information is appropriate for your needs and, where appropriate, seek professional advice.

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