Prepaid funerals frequently asked questions for the funeral industry
The Fair Trading (Prepaid Funerals Code of Practice) Regulations 2020 commences on 1 March 2021. The below questions should assist both consumers and funeral organisers.
‘Funeral organiser’ is a collective term for funeral directors and funeral brokers. A ‘funeral broker’ is a business that arranges funerals to be conducted by funeral directors. Funeral brokers are covered by the Code.
Why have the code?
Consumers need to clearly understand what they are signing up for and have any funds they invest protected.
The code aims to reduce financial risk for consumers who purchase a prepaid funeral contract, by providing certainty about investment of funds. It also specifies contractual details that need to be included, such as what goods and services have been agreed to and their cost.
Is there a cooling-off period?
Yes, a cooling-off period of 30 days applies. If a client terminates a prepaid funeral contract within this time, the funeral organiser may only claim a reasonable administration fee. No other amounts may be charged.
Does the code apply to prepaid funeral contracts from before 1 March 2021?
No, the code only applies to contracts entered into from 1 March 2021.
What details need to be in a prepaid funeral contract?
The contract must include:
- the funeral organiser;
- the person arranging the contract;
- the funeral recipient;
- the person the funeral organiser is to contact upon notification of the recipient's death (e.g. next of kin or will executor);
- the investment manager; and
- the selected funeral director (if the contract is entered into by a funeral broker).
The contract must clearly state the total cost of the contract including GST and itemise the cost of each individual component.
The contract must provide for what happens to payments if:
- the funeral organiser ceases to carry on business (e.g. bankruptcy, insolvency, dissolution or winding-up of the funeral organiser);
- the funeral organiser is unable to perform the contract for any reason;
- required instalment payments do not get made in full and on time;
- the recipient moves away (e.g. interstate);
- the client ends the contract outside of its terms; or
- the recipient dies before the contract is fully paid off.
If the contract allows termination, it needs to set out how a client may terminate the contract.
What other information does the funeral organiser need to give a consumer?
A funeral organiser must give a consumer information about where their funds will be invested. This information, such as the Product Disclosure Statement needs to be developed by an investment manager and must be given to a consumer before they sign a prepaid funeral contract.
What format does a prepaid funeral contract need to be in?
Yes. The contract must be:
- in writing
- text font size 12 or higher
- signed and dated by both parties
Can a person arrange a prepaid funeral contract for someone else?
If a funeral recipient lacks the capacity to enter into a prepaid funeral contract themselves or wishes someone else to arrange the contract, a contract can be made with another person. In such cases, the funeral organiser must take reasonable steps to check the funeral recipient indeed lacks capacity or has agreed. Consumer Protection recommends sighting a guardianship or administration instrument, such as an Enduring Power of Attorney or Enduring Power of Guardianship.
Can there be contractual changes to charge more for agreed services?
No. The cost of the contract is fixed unless both parties to the contract agree to vary it, for example if an additional service is later required.
Where the recipient of the prepaid funeral has passed away, any change to what was included in the contract must be agreed to by the recipient's legal personal representative.
Who should receive a copy of the signed prepaid funeral contract?
A copy of the signed contract must be given to:
- the funeral recipient;
- the person arranging the contract; and
- the recipient's next of kin or will executor.
How must prepaid funeral funds be invested?
Consumers' funds must be invested with a prescribed investment manager. See ‘Who can be an investment manager’ below. The funds must:
- be invested in an account in the client’s name; and
- only be paid out when the investment manager receives written notice from the funeral organiser that the recipient's funeral has been carried out as per the contract.
An amount paid for GST, or for a fee or charge, does not have to be invested.
How long is there to pay prepaid funeral funds to an investment manager?
A funeral organiser has 16 days to pay any funds received from a client to an investment manager.
Who can be an investment manager?
Investment managers can be:
- a company registered under the Commonwealth Life Insurance Act;
- a friendly society;
- a licensed trustee company as defined in the Corporations Act; or
- the Public Trustee.
Are public cemeteries subject to the code?
No. Trust funds held by a cemetery manager, such as the Metropolitan Cemeteries Board, are already subject to regulation under the Cemeteries Act 1986 (WA).
Prepayments received by a funeral organiser from a client in respect to a contract with a cemetery manager must also be paid to the cemetery manager within 16 days of receipt.
Where can I get a copy of the code?
A copy of the Fair Trading (Prepaid Funerals Code of Practice) Regulations 2020 can be found at the Western Australia Legislation website.
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