Information on Funeral Trusts
Most people will be aware 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.
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 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 and if on your death there are funds left over, those funds may remain the property of the funeral director. You should seek advice before signing any such contract.
What many people are not aware of is that everyone is entitled to have an amount of up to $10,000 set aside in a prepaid funeral trust. This is a declaration of trust where an amount of up to $10,000 is placed in the name of trustees, to hold the same for the express purpose of paying for your funeral. These funds may be invested in an investment of your trustee’s choice. Under new income testing rules for residential care subsidies the income from the funeral trust is counted as income available to pay for your care. At the time of your death, the funds are used to pay your funeral account and the balance forms part of your estate and is distributed according to the terms of your Will. Importantly, the beneficiaries of your estate enjoy the benefit of any funds that are left over.
In determining eligibility for a Rest Home Residential Care Subsidy the amount set aside in a Funeral Trust is not included in your assets. This is for a maximum of $10,000.00
This information is provided by Brent Selwyn, Harmans Lawyers, Solicitors. February 2009. http://www.harman.co.nz