QGudday Mary. Just a thing about funeral costs. I’m horrified at the cost that is charged. Anyone can make their own arrangements at less than $1,000 — excluding the wake.

Cremation cost $650; medical referee $100; death certificate ?; permission to cremate free; casket $150, or shroud free: advertising $100?.

The family can knock up a box over a few beers (or a shroud is allowed on a plank), have a ceremony at home, then off to the crematorium on the back of the ute.

I am even thinking or making my own box as a wet day job, as the grandkids are not all that handy.

Our family and friends are, and will continue, looking after our own this way at this time. Very therapeutic.

AYour letter will get a lot of people thinking. While not everyone would want to take all your steps in quite such a DIY way, they might want to consider some of them.

By the way, I wondered what the role of a referee is. Te Whatu Ora (Health New Zealand) says: “The medical referee must be an experienced medical practitioner. They review the death documents to ensure:

  • “The cause of death has been clearly established.
  • “That the death does not need to be reported to the coroner.
  • “There is no reason why the body should not be cremated.”

Oh, and the cost of a death certificate is $33.

QYour column recently included a letter about delayed life insurance payouts.

Far too often, A owns a policy on their own life. So, when A dies, the entitled person is A’s executor. That means that probate has to be obtained to establish legally who is the executor.

The solution is simple. The policy on A’s life should be owned by B, who might be A’s partner, family member or family trust. Basically anyone trusted by A. Then, the policy is not part of A’s estate. It belongs to B.

All B has to do is provide proof of their ownership of the policy, and a copy of A’s death certificate.

Probate of A’s will, or whether or not there is any valid will, is irrelevant.

Astute advisers should raise this issue, but many seem not to do that.

If the policy has not been issued to B at the beginning, it is very easy to transfer ownership of an existing life policy, and have that endorsement added.

That said, some care is needed because the policy belongs to B in all respects. A and B need to trust each other because the premiums have to be paid and B is liable (not A). Also, B might borrow against the policy, and the payout to B is entirely the property of B who may or may not prioritise A’s funeral debts!

But for many typical family situations that is a neat solution.

People who find the probate process inconvenient, slow, intrusive, or expensive can avoid it in many situations by having assets in joint ownership or joint accounts. The survivor then owns the asset or account outright.

Again, the death certificate is sufficient proof that the survivor owns the asset.

But be warned. A mere signing authority over an account does not make it a joint account.

If the bank finds out the account owner has died, they have been known to deny the person with authority (often the adult child) access to the account. They argue that the authority died with the account holder.

But, so far as I am aware, there is no obligation on the authority holder to tell the bank that the account owner has died. And a side effect of electronic banking is that I would bet that a good number of accounts of deceased are “managed informally” by surviving spouses or family members with no harm done!

AThe correspondent who was angry about how long it took to receive life insurance payments after her husband’s death had, it seems, two policies that didn’t need to wait for probate. And it still took nearly three months to receive the money.

A third policy, in her husband’s name only, took even longer — because she had to wait for probate to be granted.

Still, your suggestion will be helpful to readers. At the same time, everyone should try to have immediate access to several thousand dollars for unexpected expenses in a bank account or similar.

And for many couples, owning assets jointly makes lots of sense. Thanks for the advice. Your qualifications show you know what you are talking about!

QCan I just put in my two cents re life insurance?

Ten years ago I was given seven to twelve months to live, following the second operation to remove metastatic melanoma from my brain.

At that time they also found tumours in my groins and lungs. There was no treatment available at that stage. Because they gave me a terminal diagnosis, I was able to cash in my life insurance.

We paid off our mortgage as I couldn’t work any more. I accessed alternate health treatments, which is not cheap, and have healed myself from the cancer.

I’ve been cancer-free for eight years. I could not have done all this without life insurance!

AWell done!

And before readers write in about whether alternative cancer treatments work, or whether you would have recovered anyway, that’s straying from what this column is about. Your main point is that life insurance can be really helpful even when the insured person doesn’t die.

QThe markets’ “Fear & Greed index” is shifting further into “Extreme Fear.” The common wisdom is that that is a great time to buy. Maybe so for those with a long-term view and strong nerves. It’s not a good sign for the rest of us.

ASpeak for yourself!

You’re referring to an index developed by CNN Business to measure investor sentiment.

“It indicates how emotions influence the way investors pay for stocks. The index provides a window into whether stocks are fairly priced at any given point in time,” says Investopedia. It’s based “on the logic that excessive fear will drive share prices down, and too much greed will drive prices up.”

And if prices are down, it’s definitely better to buy than to sell. While some share prices may be on their way down to zero, the majority will recover.

However, while the index is quite interesting, I never take any notice of it as far as investment decisions go.

History shows us that it’s better to just keep investing a regular amount regardless of the markets. Bonus: it’s much less work.

QI read your recent recommendation for employees to put any money above 3 per cent of pay directly into KiwiSaver rather than through IRD, to get the gains the delay takes.

However, if you pay through your employer, isn’t it before tax rather than after tax? Therefore you pay less tax?

ANo, you don’t pay less tax if your KiwiSaver contributions are sent via your employer — although I can understand why you think that.

To keep the numbers easy, let’s say you earn $100,000. If you contribute 3 per cent of your pay, your employer will send $3,000 a year to your KiwiSaver account. And if you contribute 8 per cent, they will send $8,000.

However, your full $100,000 is taxed under the PAYE system. Your KiwiSaver contributions are taken out of your after-tax pay. So there’s no tax advantage to having the money get to your KiwiSaver provider via your employer and Inland Revenue.

Still, if you are an employee you should always send 3 per cent of your pay via your employer, so you receive the employer contribution.

By the way, the correspondent in the earlier Q&A said it can take up to two months for your KiwiSaver employee contributions to get through Inland Revenue and reach your provider. But another reader wrote to say that his KiwiSaver statement shows it takes only three days.

“Are you certain those contributions aren’t taken from your pay of a few weeks earlier?” I asked.

He replied that his pay is irregular, and the deposits match the variation in his pay.

He works for the government, so perhaps that speeds up the process. Anyway, there is clearly considerable variation in how long the process takes. Still, sending money directly to your provider will always be quicker.

QI am 74 and single, and have a $300,000 term deposit expiring this month with Kiwibank. Had that since retirement in two-year terms, interest paid monthly, with the possibility of taking $50,000 out if needed.

Interest rate was 4.2 per cent for the last two years, and it is 6 per cent now for a one-year term and 5.7 per cent for a two-year term.

Don’t know if it is better to go for the one or two years without a crystal ball. Or is there a better way to use the term deposits in a different way?

You talk about laddering often, but I don’t understand how you would set that up, starting with a lump sum of $300.000.

Or is there another way of investing this money, while still being able to use the earnings to add to my superannuation. Thank you for your insight in this.

AYou’re not the only one who can’t predict interest rates. Nobody can do that totally accurately, not even the experts. That’s one reason laddering term deposits works well.

In your case, you are clearly happy to tie up the money for two years. For one thing, as you say, Kiwibank gives you the opportunity to withdraw up to 20 per cent of your investment at any time, without reducing the interest you receive. This feature, which not every bank offers, is available on term deposits of two years or longer.

But there’s also another reason for preferring two years over one year. Usually you’ll get higher interest. That’s not the case at the moment, because everyone expects interest rates to fall over the next few years. But normally banks will pay more to those willing to tie up their money for longer. And I assume you are wanting a long-term strategy.

So let’s get you into two-year laddering.

How do you set it up? When your $300,000 matures, invest half in a one-year deposit that matures in 2024, and half in a two-year deposit that matures in 2025. A year from now, reinvest the formerly one-year money for two years, maturing in 2026. And from then on, reinvest every deposit for two years.

After the first set-up year, all your money will be invested for two years, but you get access to half the money every year. You never know when you might need that.

Laddering also lets you diversify your interest rates, with half the money at one rate and half at another. If you were to stick with your current practice, sometimes you would be in luck with interest rates on all your money, but sometimes you wouldn’t. By laddering you reduce that risk.

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Mary Holm, ONZM, is a freelance journalist, a seminar presenter and a bestselling author on personal finance. She is a director of Financial Services Complaints Ltd (FSCL) and a former director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to [email protected] or click here. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.