One of the trends within the funeral industry has been the growing prominence of pre-paid funerals. Electing to pre-pay your funeral expenses up-front before one’s passing can be done by way of a deposit and repayments, or as a full lump-sum payment. A contract will be formed which outlines the specific costs and type of funeral desired. Payment can be made to the funeral director and stored in a trust, or used to purchase funeral bonds with benefits transferred to the director. In this article we’ll focus on the first of these options, direct pre-paid funeral expenses.
When it comes to the benefits, there are several considerations that interested parties should note. As well as being appropriate for cultural funerals, you can lock in today’s prices and avoid the prospects of inflation or increasing costs that may lead to surprises in the future. This is a particular benefit if a funeral is not expected for a considerable time. Similarly, with a long time-frame pre-paid funerals offer a cost-effective solution compared with funeral insurance and bonds. Expenses will also remain exempt from Centrelink’s assets test.
In effect, the risks associated with the cost of the funeral lie with the funeral home and director, as you will not be required to pay for any price increases. With that said, you are unlikely to be afforded a refund should you change your mind. One exception might be when you move beyond the location covered. For clarity, details such as transfers to other providers, ownership transfers and the like will need to be inspected within the contract.
Following on from the above, pre-paying your funeral expenses reduces the financial burden on your family when they are likely to be suffering grief and coming to terms with loss. The arrangement will also mean that your family won’t be required to deal with the difficult task of deciding where and how to bury you – an unexpected and complicated matter for most. Alternatively, if the details are a little too morbid for your consideration, you can pay for the funeral and leave the particular details to be sorted by family. In this situation, it’s ideal to have the conversation as a family.
Like most planned funeral services, pre-paid funerals are likely to come in more expensive than a funeral you plan yourself. This type of plan may also reduce the flexibility you have in being able to procure services from different funeral homes or providers. You’ll want to make sure that you understand exactly how a funeral home is handling your money, with state legislation governing this. This means you will likely have to undertake more research than you may have anticipated, particularly with respect to any exclusions and extra charges.
As is the case with most pre-paid services, paying up-front for your funeral is one way to minimise uncertainty, reduce future involvement, and potentially save on costs over the long-term. You won’t be subject to age or health tests either. But as always, you won’t necessarily have the flexibility. So with that, make sure to take into account your future needs and plans as much as possible.
