Paying ahead for a funeral gives peace of mind and eases the burden on loved ones. A prepaid funeral lets you arrange and pay for your funeral now, at today’s prices, with a chosen funeral director. A funeral bond is a separate investment that grows over time to help cover future costs. A prepaid funeral is generally exempt from the pension assets test with no limit, while a funeral bond is exempt up to a set cap, so it is worth understanding how each works.
Planning ahead for your own funeral is a thoughtful gift to the people you love. It spares them difficult decisions and unexpected costs at an emotional time, and it lets you record exactly what you would like. Two of the most common ways to plan ahead are prepaid funerals and funeral bonds. This guide explains how each works, the differences between them, and what to consider. It is general information rather than financial advice, and our team at Keith Logue & Sons is always happy to talk through your options with no obligation.
What Is a Prepaid Funeral?
A prepaid funeral lets you plan the details of your funeral and pay for it in advance, at today’s prices, with a funeral director of your choice. Once it is paid, the cost is locked in, so your family will not face price rises in the years ahead. Your wishes are recorded, the funds are held securely as required by law, and there is nothing further for your loved ones to arrange or pay. It is a way to take care of everything in advance, with the funeral director you trust.
What Is a Funeral Bond?
A funeral bond is a managed investment designed specifically to help meet future funeral costs. You contribute either a lump sum or regular payments, and the bond grows in value over time. The money can only be released to cover funeral expenses after death. Unlike a prepaid funeral, a funeral bond is not tied to a particular funeral director or a fixed set of arrangements, which gives flexibility, though it does not lock in today’s prices.
Prepaid Funeral vs Funeral Bond: What Is the Difference?
Both help you plan ahead, but they work quite differently:
| Feature | Prepaid funeral | Funeral bond |
|---|---|---|
| What it is | A funeral arranged and paid for in advance | An investment to cover future funeral costs |
| Price certainty | Locks in today’s prices | Grows over time, no fixed price |
| Arrangements | Details chosen and recorded now | Decided later by your family |
| Tied to a funeral home | Yes, your chosen director | No, used wherever you wish |
The Benefits of Planning Ahead
Whichever option you choose, planning ahead offers real comfort:
- Peace of mind. Your wishes are known and recorded, not left to guesswork.
- Less burden on loved ones. Difficult decisions and costs are taken care of in advance.
- Financial certainty. A prepaid funeral protects against rising costs, while a bond helps you set funds aside gradually.
- A personal farewell. You can shape the service to reflect your life and values. Our guide to planning a funeral can help you start.
How Funeral Bonds and Prepaid Funerals Affect the Pension
This is an important consideration for many families, though the two options are treated differently. A prepaid funeral that is paid in full is generally a fully exempt asset, with no upper limit, so it is not counted in the assets or income tests. A funeral bond is also exempt from the Age Pension assets and income tests, but only up to the funeral bond allowable limit, an amount the Australian Government sets and indexes each year. This means setting money aside for your funeral may not reduce your pension. Because the limit changes over time, it is wise to confirm the current threshold with Services Australia or a financial adviser before you decide.
Frequently Asked Questions
Is a prepaid funeral a good idea?
For many people, yes. It gives real certainty and lifts a great deal of pressure off the family at an already hard time. It is not the only way to plan ahead, though, so it is worth comparing a prepaid funeral with a funeral bond and reading any agreement carefully before you commit.
What happens to a prepaid funeral if the funeral home closes?
Prepaid funeral funds are protected by law and held securely, separate from the funeral home’s own finances, so your money is safeguarded. Choosing a long-established funeral home adds extra peace of mind. Keith Logue & Sons has cared for families across Coffs Harbour and the Mid North Coast since 1967 and is now a fourth-generation, family-owned firm, so you can plan with us knowing we will be here to honour your wishes when the time comes.
Can I use a funeral bond with any funeral director?
Yes. A funeral bond is not tied to a particular funeral home, so your family can use it wherever they choose when the time comes.
How much should I put into a funeral bond?
It helps to base this on the expected cost of the funeral you have in mind. Our guide to how much a funeral costs can give you a realistic starting point.
What is the difference between a prepaid funeral and funeral insurance?
They are quite different. With a prepaid funeral you pay for an agreed funeral in advance, so it is fully covered at today’s prices. Funeral insurance is an ongoing policy with regular premiums that pay a set amount when you die, and over the years you can pay in far more than the funeral would ever cost, with no payout if you stop the premiums. For most people, a prepaid funeral or a funeral bond is a more certain and cost-effective way to plan ahead.
Plan Ahead With People You Trust
Planning ahead is one of the kindest things you can do for your family. Keith Logue & Sons has helped Coffs Harbour and Mid North Coast families plan with care and clarity for generations. If you would like to explore a prepaid funeral or simply talk through your options, our caring team is here. You are welcome to call us any time on (02) 6652 1999 or send an online enquiry whenever you are ready.
This article was written by the team at Keith Logue & Sons, a fourth-generation, family-owned funeral home that has cared for families across Coffs Harbour and the Mid North Coast for over five decades.
[REFERENCES]
- Moneysmart, Paying for your funeral, https://moneysmart.gov.au/manage-your-money-in-retirement/paying-for-your-funeral
- Services Australia, Funeral bonds and prepaid funerals, https://www.servicesaustralia.gov.au/funeral-bonds-and-prepaid-funerals
