Pre-paid funerals can be arranged by buying a plan from a local funeral director, or by setting up a "funeral trust".
Both options give you the choice of paying upfront (a one-off payment) or through "contributions" – although there’s usually a minimum amount you need to pay when you sign up.
You’ll be charged a set-up fee and most schemes charge an annual administration or management fee. Set-up fees for the 6 schemes we looked at ranged from $100 to $460 (see Plans compared).
Some people choose to pre-pay for their funeral because of the eligibility criteria for the long-term residential care subsidy. Up to $10,000 in a pre-paid funeral plan is exempt from the asset-testing requirements for the subsidy. But the trade-off is that your money is usually locked away until you die.
To meet the subsidy's asset-testing rules, most pre-paid schemes pay out only on the production of a death certificate and place strict conditions on cancellation (see Plans compared for more details). So it’s not easy to get your money back if you want to cancel your funeral plan.
How much does a funeral cost? Our 2006 survey of funeral directors found prices ranged from $5000 in provincial centres to over $7000 in Auckland. The Funeral Directors Association of New Zealand says the average cost is now around $8800.
The main costs are the funeral director’s fee, local government charges (for plot and cremation fees), and the price of the coffin. There will also normally be costs for catering, flowers, newspaper notices, service sheets, the celebrant’s fees, and the headstone or memorial work.
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