Prepaid funerals and Centrelink

Pensioners often ask about how a prepaid funeral and Centrelink benefits work. Is a prepaid funeral included in the Centrelink assets test? Can I receive a Centrelink bereavement payment if my partner prepaid their funeral?

This article will answer these common questions about prepaid funerals, to give pensioners some reassurance.

What’s the difference between prepaid funerals and funeral insurance?

Prepaid funerals provide peace of mind for seniors, to ease the future financial stress on their families when it comes time to arrange their funeral. They are arrangements where your funeral is paid in advance, either upfront or by instalments. A Bare prepaid funeral plan allows you to choose to pay upfront or by monthly instalments over two years.

A prepaid funeral plan allows you to plan ahead and pay for your funeral, directly to the funeral director. Alternatively, you can buy a funeral bond and assign the benefit to the funeral director.

The difference between a prepaid funeral plan and funeral insurance is that once a prepaid funeral has been paid in full, there is nothing more to pay. A prepaid funeral plan is a more secure financial option compared with funeral insurance.

It is common for funeral providers to invest a customer’s prepaid funeral funds into a funeral bond in their name. With a Bare prepaid funeral, all prepaid customers’ funds are held with Lifeplan Australia Friendly Society until they are needed to pay for the funeral.

If you are have opted to pay your prepaid funeral in instalments, the payments stop once the set prepaid funeral amount has been paid off in full. Unlike funeral insurance, the prepaid funeral instalment amount never increases for the duration of your plan, so there are no surprise fee hikes along the way.

On the other hand, funeral insurance is a reoccurring payment that generally increases as the policyholder gets older, often making ongoing payments unaffordable for pensioners.

‍

Is a prepaid funeral included in the Centrelink assets test?

Where the Centrelink Aged Pension is concerned, a prepaid funeral generally doesn’t count as an assessable asset that impact the asset taper rate used to determine your pension. However, if prepaid funeral funds are invested into funeral bonds, the bond amount will be included in your Centrelink assets test if they are over a certain amount.

At July 1, 2021, that amount needs to be below $13,500, however the Department of Social Services reviews the Funeral Bond Allowable Limit on July 1 each year. That means, if the funeral bond amount is more than the allowable limit, the funds will be counted as an asset and assessed under the deemed income rules.

The good news is that *the average price of a Bare prepaid funeral is less than $3,500. The price varies slightly depending on the location, but despite any small fluctuation, the funeral bond amount will be significantly less than Centrelink’s assessable assets limit.

Do I need to notify Centrelink?

If you currently receive Centrelink payments, you need to notify them if your prepaid funeral is invested into a bond in your name. Even if the prepaid funeral plan or funeral bond is exempt from the assets test, you must still notify Centrelink of the funeral bond amount.

Once your prepaid funeral has been paid in full, you will need to provide Centrelink with the contract from your funeral provider that:

• sets out the services you’ve paid for, and
• states that there are no more costs to pay.

As long as you have a contract that says you’ve prepaid your funeral in full, your assessable assets for the assets test won’t include either:

• the amount you pre pay to a funeral director; or
• the amount you invest in a funeral bond that has been assigned to a funeral director.

Further information about Centrelink and prepaid funerals can be found on the Centrelink website here, or by calling the older Australians line on 132 300.

Can I receive a Centrelink bereavement payment if my partner prepaid their funeral?

When a partner or spouse passes, the surviving partner may be eligible for financial support through The Department of Human Services, provided certain criteria are met.

Australian residents may be eligible for the following Centrelink bereavement payments:

• Partner Allowance – If you currently receive a Partner Allowance and your spouse dies, you may be eligible to receive a further 14 weeks of their pension. However, you will need to contact Centrelink and apply for another income support payment. You may also be eligible to receive a Centrelink lump sum bereavement payment (explained below).
• Pension Bonus Bereavement Payment – A lump sum payment may be available to the surviving partner of a Pension Bonus Scheme member who didn’t successfully claim the Age Pension and Pension Bonus before they died.

You can read more about Centrelink and funeral costs for pensionsers, here.

Final thoughts

We hope this article has given you some clarity about how a prepaid funeral and Centrelink payments work. Hopefully it helps you to make an informed choice about planning ahead.

It is important to note that Centrelink entitlements can change without notice. Additionally, the Funeral Bond Allowable Limit is reviewed on July 1 each year. You should contact your nearest Centrelink office for further information regarding your specific financial circumstance, on 132 300.

If you would like more information regarding pre paying your funeral, please give us a call on 1800 202 901, or visit bare.com.au to get a quote. This article is not legal advice. You should chat with an accountant or legal professional for specific advice on your personal or financial situation.

*This is the average price of a Bare pre-paid cremation paid up-front, correct at February 2024. Please note that prices vary depending on location and are subject to increase over time, however once a pre-paid plan is locked in, it will remain that price for the duration of the instalment plan. For an accurate quote and cost breakdown for your location, please visit our website.