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Funeral Bond vs Bank Account

Source: Sureplan Friendly Society (Published: April 16, 2013)

The danger of using a bank account to provide for funeral expenses

Earlier this year controversial legislation was rushed through parliament that allows the federal government to claim money as “unclaimed moneys” from bank accounts that have been inactive for three years.

From May 31 the government will be able to claim money from accounts that have not had a withdrawal or a deposit made within three years (previously it was seven years) and it will be transferred to the Australian Securities and Investment Commission (ASIC).

While the new law has been criticized as a cash grab, the government says that if anyone can prove ownership of the funds from the inactive accounts, the money can be reclaimed from ASIC but this is a process that could take months.

Critics have further pointed out that some of the inactive bank accounts have been set up for rainy day scenarios such as for inheritance purposes, or for a child’s education or to cover funeral expenses.

In effect the tightening of the time frame for inactive bank accounts means people wanting to plan ahead for their funeral arrangements need to find an alternative funding method otherwise they could leave their family with the headache of reclaiming the bank account balance from ASIC. Considering this, anyone wishing to put some money away for their funeral arrangements, the purchasing of a funeral bond such as our Sureplan Gold is a wise option as funeral bonds are not caught up under this government legislation.

A funeral bond such as Sureplan Gold could be considered as a sort of funeral saving plan. It delivers a return (bonus) that historically has been as good as a bank and people can either pay a lump sum or make regular deposits.

Sureplan Gold is a conservative, low risk fund as it is invests only in A and AA rated fixed interest securities and cash. A bonus can be credited to members’ policies annually from any surplus (growth) generated in the fund.

Unlike bank interest, any annual bonus if paid is not part of a member’s tax assessable income. Also Sureplan Gold has no contribution or application fees.

The bonds are also useful for people on Centrelink or the Department of Veterans’ Affairs pensions. Funeral bonds are considered an exempt asset for pension purposes up to a maximum threshold (which changes each July 1, currently it is $11,500). This allows an individual to put away $11,500, or in the case of a couple they can put away $23,000 and have it not income or asset tested. This can assist people who are on a part-pension or can help others who are just outside the pension threshold to qualify for a part-pension and the associated fringe benefits.

Also, should people need to undertake an asset assessment to determine their eligibility for a government subsidy when entering an aged care facility a funeral bond may also be considered as an exempt asset.

After the expiration of the 30 day cooling off period the funds held in a funeral bond cannot be withdrawn until required for payment of funeral expenses.

To set up a funeral bond through Sylvan Funerals, please contact us on (07) 3812 4000 or click here for more information

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