A bereavement and the funeral that goes with it will affect your loved ones – both emotionally and financially. An overwhelming number of decisions need to be made quickly and often under a high level of stress. Even more difficult, is the added financial impact of having to pay for funeral arrangements – often at short notice.
Funeral expenses can range from around $5,000 to over $15,000; depending on the nature of the funeral you choose to have. They are often a family’s third largest expense after paying for a house or car.
A Funeral Trust is designed to cover, or contribute toward, the cost of your funeral expenses. Money that is deposited into a Funeral Trust by you cannot be withdrawn until after you pass away (unless you permanently migrate overseas). So, you can be assured that the money you have put aside will only be used to contribute toward the payment of your funeral expenses.
Funds are then available to be paid out to either the funeral director or the person who produces evidence that your funeral expenses have been paid by them.
Any balance remaining that is not required to meet your funeral expenses will be forwarded to the person administering your estate for distribution in accordance with your Will.
Asset testing exemption
If you wish to receive the residential care subsidy, you are required to have a financial means assessment. This assessment includes an assets and income test. Currently up to $10,000 of any pre-paid funeral of a person or their spouse is exempt from the assets test and any interest generated from the pre-paid funeral amount is exempt from the income test. Therefore, you can set aside up to $10,000 for your funeral and still qualify for the residential care subsidy.
What will it cost?
The minimum initial contribution to establish your Funeral Trust is $2,000 and an establishment fee of $150 is applied.
There is no maximum amount that you can hold in your Funeral Trust, although asset testing may apply to amounts over $10,000. You can continue to add to your Funeral Trust with minimum deposits of $1,000 at a time, or alternatively you can set up a direct debit authority for making smaller contributions more regularly.
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