It makes sense to plan for the inevitable

Most of us only find out about funeral costs when we need to arrange the funeral of a family member or friend.

The death of a loved one is a stressful time. Planning ahead can help ease the burden on those left behind.

The death of a loved one is a stressful time. Planning ahead can help ease the burden on those left behind.

Funerals can cost from $4,000 for a basic cremation to around $15,000 for a more elaborate coffin, burial and flowers.

Typical items you need to pay for when arranging a funeral include funeral director fees, transport, a coffin, death certificate, permits, burial or cremation, a cemetery plot, celebrant, clergy, flowers, newspaper notices and a wake venue and refreshments.

ACCESS TO FUNDS

If you have superannuation, your fund will pay out your super balance and any life insurance to your dependents or your estate upon your death.

This money can be used to pay for a funeral but it may take some time for it to be paid out, so your family may need to pay upfront and be reimbursed once probate is granted. 

You may be entitled to funeral payments from the Department of Veterans' Affairs (DVA), your trade union, or your state or territory government. 

A bereavement payment may also be available through the Department of Human Services. 

In some circumstances (like if you have a terminal illness) you may be able to access your super early to cover funeral expenses.

SAVINGS

While not suitable for everyone, you may be able to set up a term deposit or online savings account to save until you reach an amount that will cover the type of funeral you want. 

Keep these savings separate from your everyday accounts. This account will form part of your estate when you die, so ensure you tell your beneficiaries about it so they can access it to pay for your funeral when it is needed.

PRE-PAID FUNERALS

Pre-paid funeral plans allow you to choose and pay in advance for your funeral.

This is important if you have strong cultural reasons for wanting a certain type of funeral or certain features.

You can also pay upfront or possibly in regular instalments and leave the details for your relatives to decide later.

Ask for a full description of the costs to see exactly what you are paying for and feel free to ‘shop around’ for a package you are comfortable with.

A big advantage of a pre-paid funeral is the costs are fixed in today’s dollars, even if your funeral is not for many years, hence you can avoid inflation.

You also get a much greater say in the type of funeral you will have.

A pre-paid funeral can also be a lot cheaper than a funeral bond or funeral insurance if you live for another 5-10 years.

Do, however, check whether the pre-paid funeral is transferrable in the event you move interstate to live with family, for instance.

FUNERAL BONDS

Funeral bonds are an investment product that can help you save for funeral expenses.

Funds can only be withdrawn after your death to pay for your funeral.

Money invested in burial plots, pre-paid funeral plans or funeral bonds (up to the Funeral Bond Allowable Limit) is not subject to the asset or income test for the age pension. 

You can invest in a bond either directly through an investment company, such as a friendly society or life insurance company, or directly from a funeral director.

You can pay for the funeral bond in instalments but make sure you read the prospectus and understand all the costs before you sign up. 

It is an ideal option for those who want to pay in advance, but not necessarily think about the details.

If you pay in instalments and die before the bond is fully paid for, you will only receive what you have paid into the bond and any money earned on the investment.

 A funeral bond will not lock in the funeral costs in today's dollars.

Keep in mind investment returns on your bond may not keep up with inflation, and so your family or estate may need to top up your bond to meet your funeral costs if the returns are not enough to meet the total cost.

Funeral insurance

Traditionally a taboo topic, funerals are a part of life.

Traditionally a taboo topic, funerals are a part of life.

Funeral insurance is a policy that will give your family a lump sum payment to help pay for funeral and associated expenses when you die. 

Before you buy funeral insurance, weigh up costs.

Will you be paying more for the insurance than the funeral will actually cost?

Have you considered other options to pay for your funeral?

When your premiums increase, will you be able to keep paying them?

Think long-term and remember, if you can't keep up with the payments you may lose all the money you have paid towards the insurance.

  • Source: ASIC Moneysmart