What's the actual structural difference between trust-pool and director-contract?
Trust-pool: you place money in a third-party trust (FDANZ Funeral Trust, Public Trust, or a director's own trustee company like Lamb & Hayward Funeral Trustee Limited). The trust holds the money; it earns interest; on death the funeral director invoices the trust for the actual cost of the funeral. If the cost has risen faster than your interest, your family pays the gap. Director-contract: you contract a specific funeral director today for specific services at a fixed price. The director is committed to deliver those services even if costs rise, but only if they're still operating when the time comes.
Which model is more common in NZ?
Trust-pool is more common among independent directors — most FDANZ-member directors route prepayment through The Funeral Trust (FDANZ). Director-contract is more common among chain-operated brands — InvoCare NZ (Lychgate, Gee & Hickton, Simplicity, Academy, Resthaven, Elliotts, Fountains, Beth Shan, White Lady) markets the director-contract model on funeralplanner.co.nz. Some independents (Legacy Funerals, Lamb & Hayward, Hope & Sons) run their own director-contract schemes through ring-fenced trustee companies.
Does trust-pool really not lock in today's prices?
Correct. The Funeral Trust (FDANZ) states verbatim that "funeral estimates are not fixed and are subject to inflation." Public Trust's Prepaid Funeral Trust similarly does not guarantee the cost of the funeral — funds are held, they earn interest, but the funeral cost when needed is whatever the director invoices. If interest earned doesn't keep pace with funeral-cost inflation, the difference falls on the family.
Why would I choose trust-pool if it doesn't lock prices?
Three structural reasons: (1) the money is held outside the funeral director, so director failure doesn't affect your funds; (2) you can use any participating director when the time comes — not just one — which matters if you move regions or change your mind; (3) trust-pool plans typically allow withdrawal and refund of principal if you change your mind entirely. Director-contract trades these for price-lock.
Why would I choose director-contract if the director might fail?
Because (1) the price IS locked on the contracted services — your family doesn't face inflation gap; (2) reputable director-contract schemes (Lamb & Hayward Funeral Trustee Limited, Legacy Prepaid Funerals Ltd, InvoCare's scheme) ring-fence funds in BNZ Client Funds accounts or similar trustee structures, so even if the operating director fails, the funds are protected; (3) the contracted services are usually transferable to another funeral home if the original fails, though terms vary. Ask your provider for the specific failure-mode protection in writing.
Does the NZ$10,000 Residential Care Subsidy exemption apply to both?
Yes — to both, provided the plan qualifies as a "recognised funeral plan." Public Trust's Prepaid Funeral Trust, FDANZ Funeral Trust, and recognised director-contract plans all qualify. Funeral insurance does NOT qualify. Consumer NZ confirms the NZ$10,000 exemption applies to both trust-pool and director-contract structures.
Can I switch from one model to the other later?
Trust-pool plans generally allow withdrawal of principal (minus admin fees) — you could then use those funds to fund a director-contract elsewhere. Director-contract plans are harder to exit; some are transferable within a network (InvoCare brand-to-InvoCare brand may be permitted), some are refundable, some are neither. Always ask in writing before committing.
How do funeral insurance and these two models compare?
Funeral insurance is a different product — monthly premiums for life, lump-sum payout to beneficiary. Insurance: family gets a sum of money, decides how to spend it; no RCS exemption; total premiums may exceed payout if long-lived. Trust-pool: family gets a sum of money that's already earmarked for the funeral (more or less); RCS exemption applies; fund may underfund inflated cost. Director-contract: family gets a funeral, not money; RCS exemption applies; risk is director failure. See the full side-by-side comparison.
