Investing in a funeral bond is a way to set aside funds to pay for future funeral services.
Funeral bonds are classed as an investment bond, where tax on earnings is paid from money in the bond fund without specified limits on contribution amounts. The exceptions are means testing for pensions and a “reasonable purpose” limitation. The bond fund benefit is paid only on the death of the nominated bond-holder.
All funds are paid on behalf of the estate to a nominee or directly to the estate or to a funeral director via assignment.
Tax is payable by the estate – if assessable – or by the funeral director on earnings, less a “termination bonus” that equates to the tax paid by the fund.
Funeral bonds and funeral insurance are not the same. If a consumer invests in a funeral bond, they will receive funds when the term of the bond expires. For funeral insurance, ongoing payments are required if funds are to be received.
FSA members who offer funeral bonds are: