Is prepaying for a funeral a good idea?
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 prepaid funeral is worth considering if you want your wishes settled and a funeral paid for in advance, and you can spare the money without needing it back. It is a weaker fit if you might need the cash, expect your family to qualify for the Funeral Grant, or can only prepay part of the cost. In 2025 about 74% of deaths had no pre-arrangement or pre-payment (FDANZ 2026 industry report).
Prepaying is a trade. You give up easy access to a sum of money. In return you settle a decision, set money aside for one job and, if you ever need residential care, put up to $10,000 each outside the subsidy asset test. The trade can be good or poor depending on your age, health, savings and family. This page weighs it neutrally; it does not say you should or should not. To do it, see how to prepay a funeral, and for the trust structures see how funeral trusts work.
Scope. Compared: a prepaid funeral trust, a savings account and funeral insurance, on access, cost, effect on Work and Income help and risk, as at 20 October 2026, from provider pages, government pages and Consumer NZ. Not every provider or product is covered. This is general information, not a score.
What you gain
- Decisions made. Your family gets your choices on service, burial or cremation and music instead of guessing, and a plan to follow.
- Money set aside for one purpose. Consumer NZ notes 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). That protects the money from being spent, and it is also the main drawback.
- The residential care exemption. Work and Income does not count prepaid funeral expenses of up to $10,000 each, held in a recognised funeral plan, in the asset test for the residential care subsidy (Work and Income, updated 4 August 2026). For a single person aged 65 or over the asset limit is $300,811.
- Possible price certainty, depending on the contract. We found no source that says prepaid plans fix the final price. Ask whether you are buying listed services or paying toward a cost (see below).
What you give up
- Access. The Funeral Trust's last published FAQ allowed withdrawal only if you permanently emigrate or the trustee allows it for extreme financial hardship, with a full refund if you cancel within 21 days of applying (The Funeral Trust: FAQs).
- A possible Funeral Grant. A prepaid funeral account counts as a cash asset when Work and Income assesses the grant, up to $2,697.43 (Work and Income: definition of assets). Its grant page says help from prepaid funeral cover can affect eligibility.
- Growth. Now For Them says it is "not a savings or investment product" and pays no interest or return (FDANZ: Now For Them). Other trusts may pay interest and charge fees. Public Trust charges a set-up and an end fee, with no ongoing management fee.
The shortfall problem
A prepaid amount may not match the final bill. FDANZ's 2026 report puts a typical attended cremation funeral at $11,700 and a burial funeral at $14,300, and an unattended cremation at $4,700. It says $10,000 is now "well below" a modest attended funeral, though $10,000 is still the most common deposit in FDANZ's funeral trust and the level of the residential care exemption. Our arithmetic with those figures:
| Prepaid amount | Against $4,700 unattended cremation | Against $11,700 attended cremation | Against $14,300 burial |
|---|---|---|---|
| $10,000 | $5,300 left over, which goes to the estate | $1,700 short | $4,300 short |
The exemption caps at $10,000 each, so money above it counts as an asset for the care test. The gap is paid by the estate or family, and some costs may sit outside a plan altogether. FDANZ lists pre-purchasing a plot as a way to avoid future council price rises, which shows plots and council fees are separate items to check. Never assume a prepaid funeral freezes the total cost.
What if the provider fails?
Consumer NZ advises asking what happens to your money if the funeral home goes out of business or your family uses a different provider. We could not find a New Zealand rule we can cite that says prepaid money must be held apart from a funeral home's trading funds, so the answer depends on the contract. Public Trust says its fund is under a government guarantee. For the detail see what happens if a prepaid provider fails.
Who it tends to suit, and who it tends not to
| Your situation | Prepaying tends to be | Why |
|---|---|---|
| You may need residential care in future and have savings above the asset limit | A stronger fit | Up to $10,000 each sits outside the test |
| You are likely to qualify for the Funeral Grant | A weaker fit | The balance counts as an asset |
| You might need the money back | A weaker fit | Access is restricted |
| You want your wishes recorded and honoured | A fit, but writing them down costs nothing | Preplanning and paying are separate |
| You can cover only part of the cost | Part-prepaying is possible | The estate pays the rest |
The alternatives
- Savings. Keeps the money yours and accessible, but it is easy to spend. Banks can release money from the deceased's account for the funeral without the person being the executor or waiting for probate (govt.nz). See saving for funeral costs.
- Funeral insurance. Pays a fixed benefit for premiums, with an early-death window and no guarantee that premiums stay below the benefit. See funeral insurance versus a prepaid funeral.
- The Funeral Grant and other help. Not a plan, but a floor for families who qualify.
- Doing nothing. The estate or family pays, and the executor decides.
Questions to ask before you pay
Where is the money held and by whom? What are the fees now and later? Is it a fixed price for listed services or a sum toward the cost? Who pays a shortfall? Can another funeral director use it? What happens on cancellation? The how-to guide has a check-sheet.
Planning ahead with funeral insurance
Funeral insurance is the main alternative to setting money aside, and it does not return your own money. Momentum Life Limited issues Funeral Insurance for New Zealanders aged 40 to 75, with no health questions and a fixed benefit of $3,000 to $30,000. In the first 24 months it pays only for accidental death (within 90 days of the accident), and any other death in that window pays nothing while the premiums for that person are refunded; after that it pays for death from any cause. Total premiums can end up larger than the benefit, and the benefit may not cover the whole funeral. 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, funeral costs and the Momentum Life Funeral Cover page.
Adviser's view
A prepaid funeral is worth considering if you want your wishes settled, you can spare the money for good and you may need the residential care exemption. It is a weaker fit if you might need the cash, expect to qualify for the Funeral Grant, or can only afford a part of the cost. Whatever you prepay may not match the whole bill, so plan for a gap.
Talk to a licensed adviser about funeral cover · free, no obligation.
Cite this page QuoteHub NZ (2026). Is a Prepaid Funeral Worth It in NZ? Pros and Cons. www.quotehub.co.nz/guides/when-someone-dies/is-a-prepaid-funeral-worth-it-nz. Updated 2026-10-20.
References
- FDANZ: 2026 New Zealand Funeral Industry Trends Report (PDF)
- FDANZ: Now For Them
- The Funeral Trust: FAQs
- Consumer NZ: 5 ways to pay for your funeral
- Public Trust: Prepaid Funeral Trust
- Work and Income: Residential Care Subsidy
- Work and Income: Funeral Grant, definition of assets
- govt.nz: What to do when someone dies
- Momentum Life: Financial Strength
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