FAQ. What are funeral bonds?
What are Funeral bonds?
Funeral bonds are funds invested towards the cost of a funeral, these are generally managed investments that earn interest, usually invested in an independently managed funeral fund. The interest must be added to the capital and the capital and interest is only realised on death when it is paid to the estate or to the funeral director to cover funeral expenses. Funeral bonds are generally best described as a savings plan for funerals held with a third party investment house.
Unfortunately, particularly in the last five or so years, these investment have not keep faith with the inflation rates. Funeral bonds have to be assigned either to the funeral director or to the estate of the person who has passed away.
Important to note that if the funeral bond is assigned to the funeral Director it is exempt from deeming threshold rules and is not considered an asset.
If the funeral bond is assigned to the estate or to a private person it is still considered an asset under the same rules. Funeral bonds that are not exempt are treated as a financial asset . The current value including interest is included in your assessable assets and is deemed to be earning income under the deeming rules.
The Funeral Bond Allowable Limit as at 1 July 2014 is $12,000 and is indexed in line with CPI increases every new financial year. If you have an interest in a number of funeral bonds, you may have to choose whichever combination of bonds would be most financially advantageous for you. You will need to calculate the greatest assessable value that you can be exempted.
Using a funeral bond creating Exemption from Centre link assets test and deeming rules. May help qualify for age pension or part pension.