Funeral bonds: can they be cashed in?

Paul is considering a funeral bond, but can he cash it in?

Cashing in funeral bonds

Paul is considering purchasing a funeral bond, but wants to know what happens if he changes his mind. Can he cash it in?

Q. Paul
If I take out a funeral bond and decide that it’s not right for me, can I cash it in and, if so, will I be paid interest?

A. The options for paying for a funeral have become quite topical in recent times. One such option is to invest in a funeral bond. Funeral bonds are ‘savings vehicles’ where funds can accumulate and, upon the death of the owner, the accumulated amount is paid to the funeral director or your estate.

When correctly set up, funeral bonds receive concessional treatment under the Government Income Support (GIS) assessment and are taxed at 30 per cent if purchased after 31 December 2002. The trade-off is that it is specifically designed to pay for your funeral therefore if you change your mind, you generally cannot withdraw the funds. In most cases the funds will only be released to the nominated funeral director or the estate.

If you invest in a funeral bond and do change your mind at a later date, you are able to leave the investment in place, cease making additional contributions and the capital, with subsequent earnings (i.e. interest) will be paid upon your death.

So if you are considering a funeral bond, or any other method to cover your funeral expenses (i.e. prepaid, or insurance), be sure to look at all the options, features and restrictions to confirm it is the most suitable vehicle for you. Be sure to read the Product Disclosure Statement (PDS) and/or terms and conditions carefully. These can be obtained from the provider. For clarification on the Centrelink assessment, refer to the Financial Information Service on 132300.

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    COMMENTS

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    Old Man
    16th Aug 2016
    11:40am
    I have a problem with funeral insurances, including bonds, as they are misleading. They are sold on the basis that a funeral will be covered in the event of death but this is not always correct. What people are buying is an agreed sum in the form of an insurance policy with set premiums and a set payout. Whilst the funds look good at the time of purchase, years down the track when death occurs will invariably show that the payout is much less than the cost of a similar funeral.

    I believe that the answer lies in a prepaid funeral which can be made with participating companies. The whole funeral can be planned by the person(s) who will be the recipients and will include the casket, the venue, the hymns, the service and the wake. The payments are made up front and will cover the costs regardless of the amount of time that will pass between the purchase and the funeral. It gives peace of mind and will allow the family to grieve without the worry of organising a funeral at such a difficult time. All funds prepaid do not count as an asset for Centrelink purposes.

    16th Aug 2016
    12:02pm
    Don't waste your money on them, they are probably as refundable as Dick Smith gift cards, spend up and enjoy while you can, and when you kack it the family can "crowd-fund" your burial like all the rest of the deadbeats do nowadays.
    johnp
    16th Aug 2016
    6:46pm
    I agree with Fast Eddie. also funerals are not that expensive anyway; they generally start from around $2K and the directors costs are the first to come out of the estate !!
    CindyLou
    16th Aug 2016
    8:36pm
    I can't stand all this funeral insurance crap - funerals are a rip off but in reality your own funeral is not your problem as you are dead. Chill.


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