Prepaid Funerals – Court rules in favour of a Gold Coast family
Much has been written about the recent Court ruling in favour of a Gold Coast family receiving funeral benefits from Alex Gow Funerals. As we know, a Qld Magistrate accepted Beryl Turner had funded her funeral service after committing to a prepaid funeral service for 25 pounds in 1948. Although she paid the last of the 25 quid in 1980, the Court deemed the contract valid. Alex Gow Funerals contended the prepayment did not meet the current cost of the funeral and sued the family for $7195 balance. This turned out to be a very bad idea for the company. The court upheld the policy “without further payment”.
And therein lies the rub. Big companies (both funeral and insurance) implore us to ‘make it easier on your family’ and prefund our funerals. Indeed, when you think about it, you have to be a very large company to pay for all that incessant funeral insurance and prepaid advertising that dominates daytime television. These companies do so to secure ‘future business’.
I have always thought pre-paid funerals, which are more popular in southern states, are not a good idea. As Alex Gow can testify, no-one can foresee the costs for years into the future and taking payment for a future service – in this case 66 years later – is a very risky undertaking.
The better strategy is the funeral bond. Instead of paying for a specific list of services, monies are put aside over time. That money remains your asset, earning interest, and all the while dedicated to the specific purpose of funeral funding. The Federal Government permits us to deposit up to $12,000 in a funeral bond and that amount remains exempt from the assets assessment test. When required, if there is more in the fund than the funeral costs, surplus monies are refunded to the Estate. Conversely, if there are insufficient monies to cover the full true cost, families/Estates make up the shortfall.
Prepaying for a service is akin to ‘rolling the dice’. Given there are 19,000 funeral bonds like the one Mrs Turner undertook, no doubt there are some very nervous funeral companies out there.