New lease of life for funeral bonds
The change to the asset testing ceiling of funeral bonds has been welcomed by the industry and is expected to boost sales of the products.
From January 1, next year, the social security income and asset test exemptions ceiling for the bonds double from $5,000 to $10,000.
The tax threshold will also be annually indexed, which is the first time this has happened since funeral bonds were introduced 16 years ago.
Lifeplan Funds Management general manager of strategic development Matt Walsh said the changes mean a person or couple will be able to have a second bond exempt from the means test.
“The new tax laws will prove extremely popular with existing funeral bond holders, as well as new investors who want to put away some money to pay for their own funeral expenses,” he said.
“A funeral can cost up to $10,000, so doubling the threshold ceiling to that amount will bring peace of mind to many funeral bond investors.”
It is expected that the changes to the asset test ceiling will benefit people receiving income support payments, clients owning a funeral bond for above $5,000 but below the new ceiling and people with one funeral bond who want a second.
Walsh said funeral costs were not something that many Australians talked about or built into their financial plans — despite it being an unavoidable expense.
“With the costs of dying continuing to rise, more people are making a provision for this cost through a funeral bond,” he said.
“For many, one of the main benefits of this type of investment is to ensure their own loved ones are not left with the financial impost of funeral costs following their death.”
Clients can make contributions to funeral bonds either as a lump sum or by regular payments of up to $10,000.
The bonds are exempt from asset and income tests and annual bonuses are exempt from personal income tax. On death, the benefit is paid to the bondholder’s estate for use in paying funeral expenses.
Lifeplan has about 30 per cent of the funeral bond market, which was historically dominated by the friendly society movement.
Recommended for you
The Australian Bureau of Statistics has reported the October figure for CPI inflation, driven by significant falls in electricity as the result of government rebates.
UBS Wealth Management has shared how much of a client portfolio it believes advisers could be allocating to private markets as well as detailed the importance of switching out of cash in 2025.
Boosted by its newly launched private credit division, asset manager HMC Capital has set an ambitious growth target of 42 per cent per annum over the next three years to reach $50 billion in assets under management.
Geared funds are proving to be a popular strategy for wealth accumulation, however its complex nature means financial advisers have an important role to play in harnessing the benefits while mitigating potential downsides.
