Benefits of funeral cover

As Australians become more aware of the need for financial planning, covering their funeral costs is one area which is now being considered a necessity. But are there any benefits in the here and now?

Q. Mignonne
My husband would like to know, if we take out funeral cover, does it effect our pension at all?

A. Provided by Centrelink
Without knowing more about your personal circumstances it is difficult to give precise information. Generally speaking, however, taking out funeral cover, or insurance, will not affect your pension.

In addition to funeral cover, there are other preparations you can make for funeral expenses. These preparations can include:
· pre-purchasing a burial plot
· pre-paying funeral expenses
· investing in funeral bonds
Your assets and income are used to calculate your Australian Government income support payment. However, some assets are exempt and not taken into account when calculating your payment.

Burial Plots:
You do not have to tell Centrelink about a burial plot that you own. A burial plot is not included in your assessable assets, regardless of its value.

Prepaid funeral expenses:
You do not have to tell Centrelink about any pre-paid funeral expenses, unless you also own a funeral bond. Centrelink will not include any of the amount that you prepay to a funeral director provided you have a contract that sets out the services to be undertaken where no more expenses need to be paid.

Funeral bonds:
You must tell Centrelink about any funeral bonds that you own, even if you know they are exempt from assessment. Funeral bonds that are assigned to funeral directors as prepayment for contracted services are assessed prepaid funeral services.

For other funeral bonds, Centrelink will not include the value of up to two bonds, provided the following two criteria are met:
· you do not also have prepaid funeral expenses
· the amount invested in the bonds to be exempted does not exceed the Funeral Bond Allowable Limit.
Note: this is currently $11,000 and is indexed in line with CPI pension increases every 1 July.

If you have a joint funeral bond, it counts as one bond towards your maximum allowable of two, but the total amount paid by both investors counts toward your individual Funeral Bond Allowable Limit.

Funeral bonds that are not exempt are treated as financial investments. Your share of the current value (including interest) is included in your assessable assets and is deemed to be earning income under the deeming rules. For more information on deeming rules, visit www.centrelink.com.au. If you have an interest in a number of funeral bonds, you can choose to make exempt which ever combination of bond(s) would be most financially advantageous to you. Centrelink can assist you with this.

To view the Centrelink fact sheet, Funeral expenses, preparations you can make, visit www.centrelink.com.au.