Death and Taxes; neither is fun, and frankly, we’d often prefer not to talk about them.
However, we are grown ups and need to be pragmatic. The average cost of a funeral in New Zealand for example is nearly $9000. Given that we will all have one, one day, we should all have a plan. While it may seem rather clinical to discuss funeral arrangements and costs, it can save family arguments, misunderstandings and heartache, not to mention financial burdens.
Not all families have thousands of dollars available at the drop of a hat, so what are the options when it comes to planning and paying for a funeral?
In an ideal world, we’d have enough saved in a tidy little account, with all our wishes outlined, to save our loved ones any additional stress in an already trying situation. If this is you; congratulations. Do check you have enough there to cover today’s costs, as prices do vary. Also check that your funeral fund will not be tied up in probate, if any issues arise with your estate. Even if your family gets the money eventually, having to pay upfront and be reimbursed can cause headaches.
There is a number of options if you would like to pre-pay your funeral. You can pay a lump sum, or in installments, depending on the plan you choose. Acceptance is guaranteed. Upon your death, the funds may be accessed by the registered funeral director of your choice. If the final costs are less than you have pre-paid, your family will need to pay the balance, or conversely, any money left over will be refunded. For further information, contact the Funeral Directors Association of New Zealand.
You can take out funeral insurance for your self, or on behalf of someone else. Funeral insurance premiums will pay out an agreed lump sum (generally between $5000 and $15,000) and premiums can be tailored to suit most budgets. This payment is tax-free and usually falls below the probate limit.
Danielle Davenport of Cigna Insurance says families who can openly discuss funeral insurance and planning openly, feel more prepared and relaxed about the inevitable. “Whether the individual or the whole family takes out the policy, there is open communication and all wishes cn be discussed,” she says.
Acceptance is guaranteed, however if death occurs within the first two years of the policy, the premiums will usually be refunded, rather than the policy being paid out. As an example, the premium to insure a 60 year old non smoking woman for $10,000 of cover will be less than $50 per month. Check with an insurance specialist for further details.
This article is intended as a start point for your information. Please seek advice from a professional in relation to your own circumstances.