This article was written by Phillipa Shaw.
People may know that they are entitled to have funds set aside for a pre-paid funeral. What many people may not be aware of are the different options that exist and the amount that each person is allowed to set aside for their funeral which will not be included in an assessment of their assets under the present Work and Income rules.
Many people choose to enter into a pre-paid funeral arrangement with a funeral director of their choice. Generally speaking, this will be for a set amount which is sufficient to cover the costs of a funeral at today’s rates. Those funds are then invested in a funeral trust by the funeral director. If, after the funeral, there are funds left over these may sometimes remain the property of the funeral director but more commonly, any surplus will form part of your estate. You should seek advice before signing any such contract.
Another option is to establish a Funeral Trust to hold funds specifically for your funeral costs. Everyone is entitled to have a maximum of up to $10,000 set aside in a Funeral Trust which is not included as part of your assets under current Work and Income policy. A Funeral Trust is established by the signing of a declaration and appointment of (usually) two people as trustees (normally the same people as you have nominated as the executors in your Will). Then, the sum of money you decide to deposit in the name of the Trust is held for the express purpose of paying for your funeral. In deciding the amount it is important to keep in mind that the funds are locked into the Trust and will not be available to you in your lifetime. These funds may be invested in an investment of your trustees’ choice.
At the time of your death, the funds are used to pay your funeral costs and any balance will form part of your estate, and is distributed according to the terms of your Will.
Setting aside surplus funds in a Funeral Trust provides peace of mind that your loved ones will have one less thing to worry about at the difficult time after your death and is also a good asset protection measure.
If you are interested in exploring more about Funeral Trusts or other asset protection methods you should seek legal advice from someone experienced in this area of law. At Harmans we have a specialist seniors team to help you with any queries you may have. Give Phillipa Shaw a call on 352-2293 to arrange an appointment to discuss your situation.