One of the most effective solutions to pre-paying for your funeral is with the help of funeral bonds. Funeral bonds in Australia can help reduce the financial stress a funeral has on your family when you die.
In this article, we explain what is a funeral bond, funeral bonds vs prepaid funeral plans and the benefits of funeral bonds.
What is a funeral bond?
A funeral bond is a down payment on a funeral with recurring monthly payments over time. Over time, the value of your money increases as interest accumulates. The funds must be in the funeral bond are only for funeral costs and nothing else.
Many funeral bonds give you the option of selecting a funeral director or letting your family decide when you die. To purchase a funeral bond, you’ll need to contact a funeral home or a life insurer.
How do funeral bonds work?
Funeral bonds hold invested funds in your name for the sole purpose of paying for your funeral expenses. These bonds are only accessible when the account holder passes away. Therefore, the money is untouchable until you die.
The terms of a funeral bond depend on the management firm. Typically, a funeral bond will have a product disclosure statement that explains how it works. Any money left over after the funerals expenses goes towards your estate.
Pre-paid funeral vs Funeral bond
There are a few key differences between a pre-paid funeral vs a funeral bond. Choosing either option depends on what’s in your best interest and wishes. In either case, it helps to lessen the burden of planning a funeral during a stressful time for your loved ones.
- Funeral Bond: A funeral bond allows you to pay for your funeral in advance without worrying about the details. You can make a single contribution or make regular monthly contributions until you achieve the bond's desired value, but keep in mind that returns don’t always keep up with inflation.
- Pre-paid Funeral: You pay for the funeral in advance with your preferred funeral director. This type of funeral requires that you sign a formal contract and pay for the funeral at today's costs after you and your funeral director have discussed and prepared all of the arrangements.
Benefits of funeral bonds
There are many benefits of funeral bonds. Fortunately, Australian law governs funeral bond management firms, making them safe for people who want to save for their funeral but don't want to plan the event. Common benefits of funeral bonds include:
- Automatic savings: Unfortunately for some, when planning a funeral for a loved one, the event can be a heavy financial burden. By pre-planning the funeral, you automatically save to help with the costs when you die.
- Plan for what you want: When you pre-pay or invest in a funeral bond, you can have tough conversations with family about what you want at your funeral.
- Reduce family conflict: By pre-paying for your funeral, you are preventing any conflict between family and loved ones about what should happen at the time.
Funeral bonds in Australia are great for automatic savings, and prepaid funerals are great for locking in today’s prices. Both options are safer than funeral insurance because they are in your name and kept safe until you need the funds.