Funeral bonds are a managed fund product which will generally grow over time with bonuses, that can assist you to save for funeral expenses.
After the 30 day ‘cooling off’ period your funds are not accessible. Funds can only be withdrawn after your death to pay for your funeral. Funeral bonds are a good choice for people who want to pay in advance for their funeral, but may not want to think about all the details. Your family will not be locked into using a specific funeral director.
You will need to read the investment returns and information about fees in the Produce Disclosure Statement (PDS).
Money invested in burial plots, pre-paid funeral plans or funeral bonds (up to the Funeral Bond Allowable Limit) do not impact on a pension entitlement, as they are not subject to an income or asset test or the deemed earnings rules according to current legislation. As from 1 July 2018 the maximum allowable amount, for a funeral bond to be classified as an Exempt Asset for Centrelink and DVA pensioners, was increased to $13,000 from $12,750. No more than two funeral bonds can be held and the $13,000 limit will also apply to jointly held funeral bonds.
Please see the Centrelink’s website for more detail on funeral bonds and prepaid funerals and how Centrelink views these assets.
You can contribute to a bond either through an investment company, such as a life insurance company or friendly society, or directly from a funeral director. Many funeral bonds can be assigned to a funeral director of your choice. When completing a funeral bond application it is important to either appoint a family member as a nominee, or your chosen funeral director. The nominee can be changed at any time by normally advising the issuer in writing.
You can contribute to a funeral bond either by a lump sum payment or regular deposits, or a combination of these two, but it is important you understand all the payment options and costs before you sign. If you contribute by regular deposits, and die before the bond is fully paid for, your family will only receive the amount you have contributed into the bond, plus any accumulated growth returns. Once the “30 day cooling off” period has expired you cannot access your funds, as the bond is only payable at death.
Investment returns on your bond may not keep up with inflation, and in this case, most bonds allow for you to ‘top up’ your bond to meet your estimated funeral costs, if necessary. In all circumstances, it is necessary for you to read the bond’s prospectus to find out the details.