medicine has made the success rate for transplants

quite high. You could be helping to save the life

of another person – or even several people – by
donating organs. While it would be nice to think that
simply signing a donor card is a guarantee that your
organs will be used, this isn’t the case. You have to
be on life support, while being brain dead, in order
Prepaid to donate organs. Each province has its own agency
responsible for organ donations which you can
funeral contact for more information.
arrangements
offer tax Pre-paying for your funeral
advantages. Prepaid funeral and cemetery services can make
sense. Prepaid funeral arrangements – known as
eligible funeral arrangements (EFAs) under our tax
law – can offer some surprising tax advantages in
many cases. An EFA is simply an arrangement where
you make payments today to cover your funeral and/
or cemetery costs on death.
Section 148.1 of our tax law will allow you to
contribute up to $15,000 in your lifetime to an EFA
to cover funeral services, and another $20,000
to cover cemetery services, for a total of $35,000
in allowable contributions. You won’t receive a
deduction for amounts contributed to an EFA, but
the funds can grow on a tax-free basis in the plan.
Further, when the amounts are paid to the provider
of the funeral and cemetery services, there will be
absolutely no tax levied on the amounts paid out of
the EFA as long as the funds were used for funeral
and cemetery services.
If your family doesn’t need all the money in
the EFA that has been set aside for your funeral,
the excess money in the EFA is paid to your estate
where the accumulated income (but not your
contributions) will be taxed.
You should understand that an EFA works only
where the plan is established solely for the purpose
of funding funeral or cemetery services. That is, if
the tax authorities ever determine that your true
intention was to use the plan to defer tax, it won’t

70 CHAPTER 9: Planning for Your Funeral

 qualify as an EFA and you can count on paying
tax annually on the income in the arrangement.
The tax collector may suspect foul intentions if you
happen to set aside money in an EFA and then later
make withdrawals during your lifetime. If you are
deceased by the time the funds are paid out of the
plan, it’s safe to say that the tax collector is not likely
to question your intentions and the EFA should work
for you.
There are, of course, other ways to cover your
funeral costs. Life insurance is the most obvious
example that comes to mind. And life insurance
could be a cheaper way to pay for your funeral, but
its use depends on one important requirement: You
must be insurable. Depending on your age, health,
and other factors, you may not be able to obtain
insurance.
You might also consider funding your funeral
out of RRSP contributions. If you are over age
69, however, or are already maximizing RRSP
contributions to fund your retirement, this option
may not be available, or best for you. Speak to your
financial advisor to help determine whether this
Consider
funding strategy will work for you.
If you want more information on EFAs, contact
funding your
your nearest funeral home. funeral with
life insurance.
The contents of this chapter were adapted from: Tim Cestnick, Winning
the Estate Planning Game, (2001), (Toronto: Prentice Hall), Chapter
12. Copies of Winning the Estate Planning Game are available at www.
timcestnick.com.

CHAPTER 9: Planning for Your Funeral 71