Advance funding of your funeral

Advance funding of your funeral

Alas each of us will die eventually.  A healthy lifestyle and advanced medical care might prolong life but the day will come eventually when our mortal bodies are worn out and just stop functioning.

Is a funeral essential?

Australian law requires that ‘human remains’ be treated with dignity.  Thus your mortal body must be despatched appropriately by burial, cremation or acceptance for medical research purposes.

The choice of funeral arrangements is extensive and limited only by the requirement that all human remains are handled respectfully and disposed of reasonably promptly in an approved manner.  Hence the funeral industry is ready to undertake the task of despatching our bodies with dignity and respect after our souls have departed.

A funeral service or wake is not required by law but most families want to gather with friends to mourn their loss.  Australian funeral practices and traditions are as varied as our cultures and heritages.

Who is responsible for arranging my funeral?

The executors of your Will are responsible for arranging your funeral and paying for it out of your estate.

If you did not make a Will then your next of kin might have to arrange a funeral and pay for it with their own money and hope to be reimbursed later.

You could avoid stressing your family about the what and where of your funeral by having a pre arranged funeral paid for in full in advance.

What are the costs of a decent funeral?

A very basic but decent disposal of the deceased could cost around $3,000.  For your $3,000 you might get a vertical burial of a shroud wrapped body in degradable box into an unmarked spot in a remote burial ground resembling a country paddock, or perhaps a cremation in a chipboard box with the ashes available for collection weeks later.

In Melbourne, around $7,000 could purchase a modest funeral.  For your $7,000 you might get a minister of your religion, or a secular celebrant, to meet with the family and then conduct an hour long memorial in a chapel, plus a cremation in a wood veneered box with handles, topped with a floral tribute.  Or you could spend your $7,000 on a church service followed by a burial in a proper wooden box into the family grave.  The cost of ‘purchasing’ a new burial plot might be an additional expense.

If you have more funds available and/or a strong preference for public display then you could spend much more.  For example, you could aspire to having a new mausoleum with extensive engravings on the memorial plaque.  Your extended family could be conveyed from the chapel to the cemetery in a fleet of limousines and then back to a lavish wake.

Why arrange my funeral now?

Pre arranged funerals may better reflect your wishes and budget.

By arranging your funeral while you are in good health you are able to consult your family and then calmly make your selections.

Thus your family are protected from emotional pressure to spend excessively.  They would not be subject to the ploy, “Would that coffin be respectful to your mother? Maybe this one made of real timber and with the brass handles would be more appropriate?”  And thus the family are pressured into spending lavishly on a box that would hardly be seen for the flowers at the chapel and then burnt up later that day.  Additional amounts of $5,000, yes, five thousand dollars, for a more ‘respectful’ coffin are not rare.

Pre arranged funerals save the family from a paperwork stress

Before the funeral actually takes place the funeral director must organise registration of the death with the relevant State or Territory Registrar.  The registration of a death requires some personal information about the deceased person.

You are asked to provide this information as part of the pre-paid funeral arrangements.  While you are healthy, collating your personal information could be a family history exercise.  Your children and grandchildren could be interested to know about the earlier generations.  Then on the other hand, you might prefer to just give the funeral director the correct personal data and refrain from telling all your family’s secrets to the next generation.

Alas if someone dies without documenting their personal data the next of kin must get thinking fast to recall all the facts.  You cannot just send a son-in-law to arrange the funeral as he would likely come back and say, “You will have to go yourselves as I have no idea of when or where he was born.”

What are the financial benefits of a pre arranged funeral?

Pre arranged funerals are paid for in full at today’s prices.  Therefore your executor would not get a large bill for the basic funeral to be paid for before your estate could be accessed.

Please note that whilst you may select the style of refreshments to be offered after your funeral service, the cost of refreshments is not normally included in the pre-paid funeral package.  Your family or executors would need to pay for the refreshments and/or wake separately.

Pre arranged funeral plans are ‘exempt assets’ at Centrelink and DVA

Once you have your pre arranged funeral contract that details the agreed services and confirms that you have paid in full for these services then your pre arranged funeral contract is excluded from your assets for Centrelink and DVA, means testing purposes.

This means that you do not need to tell Centrelink about your pre arranged funeral.  But in order to explain that large withdrawal from your bank account, you could show Centrelink or DVA, the receipt for the pre arranged funeral.

But what if I died far away from home?

If you died far away then your executor or next of kin could contact your funeral director who would arrange for your body to be brought back and for your funeral to take place as pre arranged.  Alas there would be an additional fee for retrieving your body from where ever.

The additional cost could be modest if you were, say, 100km from home visiting your family.  But the additional cost could be substantial if you had a heart attack and died whilst climbing the Himalayas.

If you are still not convinced of the advantages of a pre arranged funeral then you could consider investing in a funeral bond.

Funeral bonds are managed investments with some special features.

  • Interest must be added to the capital amount of your bond, that is, it must not drop in value
  • The capital and accumulated interest can only be released on death when it is paid to your estate or directly to your funeral director to cover your funeral expenses
  • Your funeral bond money is invested in an independently managed funeral fund.

Funeral bonds are not ‘exempt assets’ at Centrelink.  You must include full details and the current value of your funeral bond in your assets each time you update your records at Centrelink or DVA.  If you have not also paid for a pre arranged funeral and you did not invest more than $11,250 in a single funeral bond which satisfies the Centrelink rules then Centrelink or DVA, would not count your funeral bond as an asset for means testing purposes.

But if you have invested in more than one funeral bond even if jointly with your partner, or your total sum invested exceeds the Centrelink limit then one or more of your funeral bonds might be counted as financial assets for Centrelink means testing.  Centrelink or DVA would assess your situation.

If you need help understanding the Centrelink treatment of funeral funds and pre arranged funerals as exempt assets then call Christine on (03) 9808 0338 to make an appointment to discuss your position.

If you would like further confidential, independent and professional advice about Centrelink, lifestyle or financial issues please contact Christine Hopper (03) 9808 0338.