How funeral trusts work in New Zealand
Financial advice is provided by Craig Smith Business Services Limited, trading as Smiths Insurance & KiwiSaver, a licensed Financial Advice Provider (FSP712931). QuoteHub is a trading name.
A funeral trust in New Zealand is an arrangement where you pay money to a trustee, which holds it for one purpose, your funeral, and pays the funeral invoice when the time comes. Up to $10,000 each, held in a recognised funeral plan, is not counted when Work and Income tests your assets for the residential care subsidy (Work and Income: Residential Care Subsidy, updated 4 August 2026).
A funeral trust is not insurance. You pay in your own money, so there is no early-death window and no benefit that can be smaller than the premiums. What you give up is easy access: Consumer NZ warns that you may not be able to withdraw money from a funeral trust unless you are in significant financial hardship (Consumer NZ: 5 ways to pay for your funeral, updated 22 May 2024). Terms differ between trusts, and The Funeral Trust, which Consumer NZ says most FDANZ-member funeral homes use, was being restructured from 2025. The provider, government and Consumer NZ pages cited below were read on 20 October 2026. Check current terms before you pay anything.
The kinds of funeral trust
People use "funeral trust", "funeral savings plan" and "prepaid funeral" for the same idea. In practice three arrangements are on offer, and they do not work the same way.
| Funeral director association trust | Trustee company trust | Funeral home's own arrangement | |
|---|---|---|---|
| Example | Now For Them (formerly The Funeral Trust) | Public Trust Prepaid Funeral Trust | Varies by firm |
| Who runs it | The Funeral Trust Services Limited, a charitable company set up by The Charitable Funeral Trust, which the Funeral Directors Association of New Zealand (FDANZ) created | Public Trust, which holds the money in its Funeral Trust Cash Fund | The funeral home |
| Fees | "No fees", with a promise to say if that changes | One set-up fee and one end fee, no ongoing management fees (amounts on Public Trust's price list) | Check the terms |
| Interest | Now For Them says "no interest or return is paid"; the older FAQ says funds "may earn interest" | Interest is added to the balance, according to Public Trust's brochure (see our Public Trust guide) | Check the terms |
| Tied to one funeral home | No: the FAQ says another firm can use the funds | No: Public Trust is not a funeral director | Often yes |
Sources: FDANZ: Now For Them, The Funeral Trust FAQ, Public Trust and Consumer NZ above. Consumer NZ says most FDANZ-member funeral homes work with The Funeral Trust, and that other homes may use their own trust arrangements "with different terms".
The two FDANZ-linked pages disagree on interest, and FDANZ announced that the plan would be restructured, with customers who joined after May 2023 written to by the end of March 2025 and all remaining customers by November 2025. It said "current plan balances will remain in the plan" (FDANZ: Future changes to The Funeral Trust). The FAQ's figures may therefore predate the new terms. The FAQ gives a minimum first payment of $200, and $20 a fortnight by automatic payment, or $500 per instalment otherwise. Treat these as the last published figures, not current ones.
How a funeral trust protects the money, and how it does not
The protection is that the money has one job, and it is harder to spend by accident than money in an ordinary account. The FAQ also says that if another funeral director conducts the funeral, that firm can use the prepaid funds toward the cost, and if the firm is not an FDANZ member the executor can apply to the trustee for the money.
What a trust does not do is promise that the funeral will cost no more than you paid. Any money left after the funeral goes to your estate, according to Consumer NZ and the FAQ, and a shortfall is paid by the estate or family. FDANZ's 2026 report puts a typical attended cremation funeral at $11,700 (range $10,000 to $13,900) and a burial funeral at $14,300 (range $12,800 to $17,000), and says $10,000 is now "well below" a modest attended funeral (FDANZ 2026 industry report).
On access, the FAQ says it is not possible to withdraw your prepayment unless you have permanently emigrated from New Zealand or the trustee allows it for extreme financial hardship. It also allows a full refund if you cancel within 21 days of applying. So the common description of a trust as "locked" or "irrevocable" is too simple: it is hard to reverse after the first 21 days, not impossible in every case. We found no source that names the legal status of other trusts, so ask the provider.
The $10,000 residential care exemption
Work and Income does not count "pre-paid funeral expenses for you and your partner of up to $10,000 each, if they're held in a recognised funeral plan" when it assesses assets for the residential care subsidy. For a single person aged 65 or over, the page says total assets must be $300,811 or less.
A worked example, with round numbers and our arithmetic:
- Someone pays $15,000 into a recognised funeral trust. The first $10,000 is not counted; the other $5,000 is.
- A couple who each hold $10,000 in a plan have $20,000 outside the test. Money above $10,000 each counts.
Three points keep this honest. FDANZ says the $10,000 level dates from 1994. Both Public Trust and Now For Them describe it as the "current" policy of the Ministry of Social Development, so it can change. And it only matters if you may apply for the subsidy.
What a trust does to the Funeral Grant
Work and Income counts a prepaid funeral account as a cash asset when it assesses a Funeral Grant, which is up to $2,697.43 (Work and Income: definition of assets). Its grant page also says help from prepaid funeral cover can affect eligibility. For a family who would otherwise qualify, a trust can mean a smaller grant or none. The grant is the lesser of the maximum or the unmet cost, so it is small beside an $11,700 funeral. See our Funeral Grant guide for the tests.
Who a funeral trust suits
- People who want money set aside for a funeral that is hard to spend elsewhere, and who will not need it back.
- Anyone who may need residential care and wants up to $10,000 each outside the asset test.
- People who want to name a funeral home now, or leave the choice open, and have the paperwork in order.
Who it suits less
- Anyone who might need the money for something else. The trust is not a savings account.
- Someone with a small balance and a fee-charging trust, where one-off fees take a large share. Compare the amounts on the price list.
- A family likely to qualify for the Funeral Grant, if the prepaid balance would cut it.
- Someone who would rather keep the money in an account their executor or bank can release for the funeral; govt.nz says banks can release funds for funeral costs without the person being executor or waiting for probate (govt.nz: what to do when someone dies).
Before you pay in
Get these answers in writing: the fees and whether they can change, whether interest is paid, what happens to any surplus or shortfall, how and when money can come out, and what happens if the funeral home closes. Our how to prepay a funeral guide has a step-by-step check-sheet, and preplanning a funeral covers writing your wishes down. For insurance as another route, see funeral insurance versus a prepaid funeral.
Planning ahead with funeral insurance
A funeral trust returns your own money to your funeral. Funeral insurance works differently: Momentum Life's Funeral Insurance, issued by Momentum Life Limited, pays a fixed benefit of $3,000 to $30,000 towards costs in return for premiums, and accepts New Zealanders aged 40 to 75 with no health questions. In the first 24 months it pays only for accidental death (death within 90 days of the accident); any other death in that window pays no benefit and all premiums for that person are refunded. Total premiums can end up larger than the benefit, and the benefit may not cover the whole funeral. Setting money aside, in a trust or a savings account, is the other way to prepare. Momentum Life holds an A.M. Best rating of B (Fair), affirmed 11 February 2026; see its financial strength page. The buttons on this page open Momentum Life's online application. QuoteHub is a Momentum Life partner and Smiths Insurance & KiwiSaver may receive a commission if you buy a Momentum policy (how we are paid). Advice is provided by Craig Smith Business Services Limited, trading as Smiths Insurance & KiwiSaver, a licensed Financial Advice Provider (FSP712931). This page is general information, not advice. See the funeral insurance hub and the Momentum Life Funeral Cover page.
Adviser's view
A funeral trust is a way to set money aside for a funeral that cannot easily be spent on anything else. That is its value and its limit. The $10,000 residential care exemption helps only if you may need a rest-home subsidy, and the money counts as an asset for the Funeral Grant. Read the current terms of the exact trust before you pay in.
Talk to a licensed adviser about funeral cover · free, no obligation.
Cite this page QuoteHub NZ (2026). Funeral Trust NZ: How It Works and What It Costs. www.quotehub.co.nz/guides/when-someone-dies/funeral-trust-nz. Updated 2026-10-20.
References
- FDANZ: Now For Them
- The Funeral Trust: FAQs
- FDANZ: Future changes to The Funeral Trust
- Public Trust: Prepaid Funeral Trust
- Work and Income: Residential Care Subsidy
- Work and Income: Funeral Grant, definition of assets
- Consumer NZ: 5 ways to pay for your funeral
- FDANZ: 2026 New Zealand Funeral Industry Trends Report (PDF)
- govt.nz: What to do when someone dies
- Momentum Life: Financial Strength
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