The three main ways to pre-pay for funeral expenses are:
- funeral bonds
- pre-paid funerals
- burial plots
Under social security legislation, amounts set aside for these funeral expenses are generally exempt under the income and assets tests. However, in some cases a combination of these may impact how they are assessed.
A funeral bond is an investment offered by a friendly society or life insurance company that provides benefits upon the death of the nominated person and cannot be accessed earlier.
Under social security legislation, funeral bond(s) are an exempt investment where the total amount invested is up to $12,750 (2017/18). Each member of a couple may invest $12,750, resulting in an exempt investment for the couple of $25,500.
A prepaid funeral is where a person makes an advance payment for funeral services for themselves or their partner.
Prepaid funerals are an exempt investment, regardless of the amount paid. The limit of $12,750 does not apply to pre-paid funerals.
A prepaid funeral may involve assigning a funeral bond to the funeral director as payment. Under this arrangement, the funeral bond is regarded as a prepaid funeral, and not a funeral bond, therefore the $12,750 limit does not apply.
A burial plot is a specific spot or right to a place at a general location, such as an area of a cemetery.
Burial plots are exempt investments, regardless of the amount invested. One does not need to advise Centrelink that they own a burial plot.
WHAT IF ONE HAS A COMBINATION OF FUNERAL INVESTMENTS?
In some cases, one may have a combination of a prepaid funeral, burial plot and/or funeral bond.
Under the Centrelink rules, where a one has both a prepaid funeral and a funeral bond, the funeral bond will not qualify for an asset exemption. However, in all cases, a burial plot and/or prepaid funeral are exempt.
The following table summarises the Centrelink treatment of different combinations of funeral investments:
|Burial plot and prepaid funeral||Both exempt|
|Burial plot and funeral bond
(below allowable limit of $12,750 for 2017/18)
|Burial plot, prepaid funeral and funeral bond||Burial plot and prepaid funeral exempt
Funeral bond assessable
|Prepaid funeral and funeral bond||Prepaid funeral exempt
Funeral bond assessable
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