Clients concerned to ensure they are eligible for a Residential Care Subsidy often consider setting aside pre-paid funeral expenses of up to $10,000. If held in an appropriate Trust Fund these monies can be excluded from the income and asset assessment for a Residential Care Subsidy.
For amounts in excess of this amount, if the specific expenses are appropriate, a higher amount may be allowed.
If the client is married and both partners have pre-paid funeral expenses, $10,000 is allowed for each partner.
Funeral expenses included
Only pre-paid funeral expenses that cover professional services of a funeral director are exempted. You should generally request a breakdown of what expenses are covered by the Trust Fund/account and what the account is going to pay for.
Definition of funeral trust funds/accounts
A pre-paid funeral expense is money put aside (usually in a Trust) exclusively for the provision of funeral expenses. If the money can be accessed and used by the client for other purposes, it is not considered exclusively for funeral expenses.
It is usually clear whether or not the trust fund or account has been genuinely set aside for funeral expenses. Evidence that it has been set aside exclusively for funeral expenses includes:
- the Trust/account is only paid on production of a Death Certificate
- the client cannot usually access the funds
- if a client can access the fund, there are limited conditions on withdrawal, such as re-locating overseas
- the Trust/account is only payable to the funeral director or administer of the clients estate
- the client cannot generally access the interest earned from the account Fortune Manning Pre-Paid Funeral Trust
Fortune Manning has formed FM Funeral Trust
Fortune Manning has formed FM Funeral Trust to hold pre-paid funeral monies for clients.
FM Funeral Trust's trustee Funeral Trust Limited completes a declaration of Trust with the client each time funds are lodged with it which records the terms on which the fund is held.
The declaration of trust has been approved by Work and Income New Zealand and meets the criteria required for exemption when applying for a Residential Care Subsidy.
The $10,000 will be held in an interest bearing account held with Fortune Manning's bankers until your death.
At that time upon receipt of an invoice from the funeral director we will apply the $10,000 plus any interest earned towards for the cost of your funeral. Any funds not used will form part of your Estate.
You do not need to pay anything to establish your Pre-Paid Funeral Trust as our fee for forming a Pre-Paid Funeral Trust is $300 plus GST plus disbursements of approximately $21 which is paid from the interest earned from the $10,000 investment.
A fee of $120 plus GST will be charged for attending to terminating the trust including payment of any funeral account.
If you wish to establish a Pre-Paid Funeral Trust for Residential Care Subsidy reasons you will need to do so prior to any application being made to Work and Income New Zealand as Pre-Paid Funeral Trusts established after an application has been lodged with WINZ will not be excluded from means testing.
Should you wish to establish a FM Funeral Trust please contact Tony Fortune or Katherine McCarthy.
For further information relating to Residential Care Subsidies please view the information on Work and Income New Zealand’s website.