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