Paying for a funeral

The cost of a funeral can be from $4,000 to $15,000 – a significant financial expense at a time that is already stressful.

Some of the typical costs include: Funeral director fees; Transport; Coffin; Death certificate; Permits; Burial / cremation; Cemetery plot; Other expenses, such as a celebrant or clergy, flowers, newspaper notices and the wake.

If you want to ease the burden on your family, you might want to consider paying in advance, or make some provision within your estate to cover the costs.

 

Pre-paid funerals

A pre-paid funeral is a simple option and allows you to take control. Working with a suitable funeral director, you’ll go through the process of choosing your ideal service. After deciding on the various options available, you will be given a quote, which can either be paid in full or in instalments.

Advantages

  • Being able to have your say: A lot of people want the control and comfort of pre-planning their own funeral, leaving nothing up to interpretation. This involves sitting down with a funeral director and figuring out all the details of the ceremony. It can also provide a sense of relief to the family left behind, who may not know what funeral decisions to make.
  • No financial burden for your family: With the cost of a funeral being potentially quite expensive, having a pre-paid funeral ensures no financial burden is left with relatives.
  • Pay for your funeral at today’s prices: The amount you’re quoted is based on today’s prices and will not rise in the future. Therefore you’re basically locking in a fixed price.
  • Doesn’t affect Age Pension: A pre-paid plan is not subjected to the Centrelink income or asset test, meaning it won’t affect the level of your pension entitlements.

Disadvantages

  • Complicated if you move interstate: If for some reason you move interstate, there may be an issue moving the pre-paid plan to a different funeral director
  • Significant expense in short term: Pre-payment will be required over a short period, which can make it expensive.
  • Difficult to get a refund: It may be difficult to get a refund if you change your mind or are unable to cover the full cost of the pre-paid funeral.

 

Funeral bonds

Funeral bonds (also known as funeral investments) are a means of saving money to meet the future funeral expenses. The investment is into managed fund, under specific guidelines and the funds can only be withdrawn at the time of death and to pay for the funeral costs.

Advantages

  • Flexibility: You can commence a funeral bond without having to decide on a funeral director, or the detail of ceremony. So if you just want to make sure there’s enough money to cover funeral expenses, this may be an ideal option.
  • Separate from other assets: Funeral bonds can be kept separate from your other assets such as bank accounts, superannuation, and investments.
  • Doesn’t affect Age Pension: Funeral bonds are also not subjected to income or asset test by Centrelink, which means it won’t affect your pension entitlements.

Disadvantages

  • Doesn’t protect from inflation: Unlike pre-paid funerals, you’re not locking in today’s funeral prices. So there’s a possibility that the price of a funeral may rise more than the interest you’ve made on the bond.
  • May not cover all funeral costs: If you pass away before making all the necessary instalments, the money and interest earned on that bond may not be enough to cover all funeral expenses. Or if you have only allowed for a simple funeral, but your family decides on something more elaborate, the bond may not be sufficient. In either of these cases, additional money would be required to cover the funeral expenses.
  • Risk of low return: Like any investment, there’s a risk of not getting a substantial return, and the dividends could be less than other investment options.

 

Funeral insurance

Funeral insurance is similar to other types of insurance – you pay ongoing premiums in order to provide a specified level of cover, and you select how much cover you want. The higher the cover amount, the higher the premiums. At the time of death, the amount of cover selected will be paid out to the beneficiary.

Advantages

  • It’s a familiar concept: Many of us have some kind of insurance, so the concept is familiar and easy to understand.
  • Quick payouts: The cover is typically paid out quickly so that funeral costs can be taken care of immediately after death.
  • Easy to buy: The process of getting funeral cover is easy and fast.

Disadvantages

  • Premiums will rise over time: As with most insurance, the premiums will rise over time. So if you’re paying these premiums over a longer period, you may feel that the premiums become too expensive.
  • No refunds if you stop paying premiums: If you do stop paying the premiums, for whatever reason, both the cover and previous payments will be lost.
  • Premiums greater than funeral costs: If you live for a long period of time while paying for funeral insurance, the premium costs may be greater than the actual cost of a funeral.

 

Other insurance policies

If you need to organise a funeral immediately, it’s a good idea to find out whether the deceased had any other insurance policies. Some policies like health and life insurance will make direct contributions to the cost of a funeral. Contributions towards the funeral are not guaranteed, and will ultimately depend on the type and level of cover. So it’s making enquires with the relevant insurance companies, to see whether you are entitled to any contributions.

 

Superannuation

If the deceased has any superannuation, the funds plus any life insurance entitlements will be paid out to the beneficiary (referred to as death benefits), and so can be used to cover any funeral costs. However the process of transferring any benefits can take some time (possibly months), while funeral costs need to be paid immediately. If you need to claim death benefits to cover the cost of a funeral, get in contact with the deceased’s superannuation fund as quickly as possible, and they will inform you of the process of how to go about filing a claim.

 

Deceased’s bank account/estate

If the deceased had sufficient funds within their bank account at the time of death, it may be used to pay for expenses such as funeral costs. They may even have a specific bank account (or term deposit) for the purposes of paying for the funeral. This can be a fast and uncomplicated solution compared to getting the deceased’s estate to cover any costs. A good idea would be to go to the deceased’s bank to find out how much money is available and whether it’s possible to pay for any immediate expenses.

While a more complicated and longer process, paying funeral expenses with the deceased’s assets (through the estate) is a common method. However, the only issue is that funeral costs will need to be paid well before the estate has been settled. Therefore, it is usual to have someone pay for the funeral expenses in the short term and then be reimbursed later by the estate. If you do need to cover any funeral expenses, make sure you keep a clear record of what you’ve paid for.

 

Centrelink assistance

A bereavement payment can be made by Centrelink to help families in need of financial assistance. This usually comes in the form of a lump sum payment, which goes towards any funeral expenses. Assistance is most common in the situation where both partners had been receiving Centrelink benefits. Centrelink can also approve the early release of superannuation funds to cover expenses. To find out whether you qualify or see what options are available, get in with contact Centrelink as soon as possible.

 

Department of Veteran Affairs

When the person who passed away was a veteran, there is extra help that can be given out to families. The Department of Veteran Affairs will give up to $2,000 (check with most recent amounts, as they can change) for each veteran who served for their country. If a veteran loses their spouse, there can be benefits for families who are in a challenging financial situation. To get more information or see whether you qualify, have a look at the information provided on their website.

 

Clubs

If the person belonged to any social clubs or trade unions, there could be some funds allocated to help families pay for funeral costs. Contact each club or organisation to see if they might have a fund set aside, or would be willing to help start a small fundraiser in honour of the deceased.