Canadian funeral costs to escalate
For immediate release
Burying loved ones is about to become far more expensive for Canadians. When the Ontario government harmonizes the GST and PST on July 1st, funerals will be subject to the Harmonized Sales Tax (HST) of 13 per cent. Currently, only the GST rate of five per cent applies. When the harmonized sales tax takes effect, it will mean a significant additional cost to consumers.
In October of 2009 provincial finance minister Dwight Duncan announced that the province will grandfather funerals that are paid for in advance of the new tax. Consumers who enter into a pre-paid funeral agreement prior to July 1, 2010, will save eight per cent of the cost of their funerals. Further, the funeral does not need to be paid in full. Provided there is a payment schedule in place the pre-paid funeral agreement is grandfathered. It is crucial, therefore, that Canadians are educated about this option now.
In 1990 when the GST was introduced, the Ontario government offered the same option to consumers to prepay their funeral prior to the official start date and thereby save the tax. Ontario funeral homes were overwhelmed by the response. Many had to keep extra staff on leading up the tax date and some stayed open late in the evenings to accommodate the influx of participants.
Funeral pre-planning involves meeting with a funeral professional, often in the consumer’s home, to learn about various alternatives. Decisions are then made ensuring the arrangements follow the wishes of the person the funeral is for, and the desires of his or her family and friends. Once everything is recorded, the overall cost is determined and an agreement may be signed where the consumer elects to pay for the entire funeral in advance, or selects a payment plan. This pre-paid agreement is what will enable consumers to save the extra eight per cent cost brought in by harmonization. Some funeral plans have a built-in insurance component so the funeral is paid for even if the person dies before the full financial obligation is met.
Not all Ontario funeral homes guarantee their pre-paid funeral agreements. Consumers should ensure that they are doing business with a funeral home that does offer this contractual guarantee. In this case, the funeral home assumes the risk of rising prices and is bound to provide all of the goods and services in the agreement even if the interest earned on the money deposited by the consumer does not keep pace with inflation. If money is left over after the funeral is paid for at the prices in effect at the time of the death, the law requires that any additional money is returned to the deceased’s estate.
Consumers need to be aware that final-expense insurance policies will not save them the additional tax imposed by HST unless they are committed to a pre-paid funeral service agreement signed directly with a funeral home. Final-expense policies are typically sold on television or by direct-mail marketing where the consumer purchases a policy over the telephone, through the mail, or from an unknown agent who visits their home. Unless the funeral pre-payment is accepted directly by the funeral home, the consumer will not be eligible for any price guarantee and the eight per cent PST savings.
Funeral establishments are highly regulated and are overseen by the Ontario Board of Funeral Services, which routinely audit pre-paid funds and have a compensation fund in place if ever there is a problem.
For more information, contact: Rob or David Carson, 705-326-3595
February 1, 2010