Is it worth it to pre-pay your funeral costs with a funeral bond
If you're planning ahead, one of the expenses you may be thinking about is your funeral.
One option to consider is a funeral bond, sometimes called a funeral investment. It is a managed investment that generates interest, which is then added to the investment to help pay for your funeral. The total amount is paid on death to your estate or nominated funeral director to cover funeral expenses.
A funeral bond can offer peace of mind as you can assign the bond to a preferred funeral home or to your estate, and you will know exactly where you will be buried and what funeral services you will receive. At an emotional time, your family will not have deal with a financial burden as well.
If a couple purchase two separate funeral bonds for $12,500 each, their assessable assets for Centrelink will be reduced by $25,000. This can be a significant benefit as the upper limit of assessable assets for Centrelink is coming down in January 2017.
Unlike funeral insurance, there are no health restrictions for applicants.
Before you buy, you need to consider the ongoing cost of a funeral bond. This can be up to 1.5% of the asset base. Nor will you get any significant growth as the funds are invested in cash and fixed interest-type funds.
It's also important to note that, as the funeral bond is designed for the sole purpose of meeting funeral expenses, you cannot withdraw any money before your death.