A customer pays a funeral home years in advance. The money sits and earns interest. Nobody receives a slip, nobody reports anything, and when the services are eventually provided nobody is taxed on the accumulated growth. That is the intended result, and it depends on a definition with a hard dollar ceiling.
Key Takeaway
Subsection 148.1(2) provides that, notwithstanding any other provision of this Act, no amount that accrues, is credited or is added to an eligible funeral arrangement is included in computing anyone's income solely because of that accrual. The definition imposes a lifetime contribution limit per individual of $15,000 for funeral services only, $20,000 for cemetery services only, and $35,000 where both are covered. Commentary warns that exceeding the limit means the arrangement is no longer a qualified EFA, losing the tax exemption, and that because a single arrangement can cover several individuals, one excess contribution can put the arrangement offside for everyone in it.
A Note On Currency
Everything here is stated as verified in August 2026 and requires confirmation before reliance.
We quote section 148.1 of the Income Tax Act from published consolidated text[1]. One of the versions we accessed is expressly labelled as the version in force from 31 August 2004 to 25 June 2013[2]. The limits appear identically in both, but we did not confirm that the current figures are unchanged and they must be checked.
We rely on three CRA documents given to other taxpayers[3][4][5]. One carries CRA's notice that although believed correct when issued it may not represent the current position of the CRA[4]. None binds CRA in respect of anyone else.
One ruling refers to a proposed subsection 148.1(4) and 148.1(5)[4]. We did not establish whether those were enacted and say nothing about them.
We did not obtain subsection 148.1(3), which governs amounts distributed from an arrangement, and this article does not describe it.
This is not tax or legal advice. Both funeral businesses and purchasers should take advice on any specific arrangement.
The Exemption Itself
The operative provision, which is unusually emphatic.
Subsection 148.1(2) opens with the words notwithstanding any other provision of this Act, and provides at paragraph (a) that no amount that has accrued, is credited or is added to an eligible funeral arrangement shall be included in computing the income of any person solely because of such accrual, crediting or adding[1].
Paragraph (b), subject to paragraph (c) and to subsection 148.1(3), provides that no amount shall be included in computing a person's income solely because of the provision by another person of funeral or cemetery services under an eligible funeral arrangement, or included in computing a person's income because of the disposition of an interest under an eligible funeral arrangement or an interest in a trust governed by an eligible funeral arrangement[1].
Three features, ours.
The opening words are a clear override. Whatever other provisions would otherwise pull the income into somebody's hands, this one displaces them.
The exemption runs to any person, not to a named taxpayer. It does not matter whether the accrual would otherwise have landed on the purchaser, the funeral home or a trust.
And it covers both the accumulation and the eventual provision of services. Money grows untaxed and the delivery of what it bought is not itself an income inclusion.
A ruling applies the first limb concretely, holding that pursuant to paragraph 148.1(2)(a), no amount accrued, credited or added to the arrangement in respect of the policy would be included in the income of either the funeral home or the taxpayer under section 12.2[4].
How Unusual This Is
Some perspective, which is our own.
The Canadian tax system contains very few genuine exemptions from tax on investment income, as opposed to deferrals.
A registered retirement plan defers tax; the money is taxed on withdrawal. A registered education plan defers and shifts. Most corporate structures, as this publication has discussed elsewhere, produce deferral rather than exemption once integration is taken into account.
An eligible funeral arrangement is different. On the statutory language, the accumulated income is never brought into anyone's income where the arrangement stays within the definition and the money is used for what it was contributed for.
Three consequences.
There is no annual reporting for the purchaser, which is why most people who have one do not think of it as a financial product at all.
The benefit is proportional to time. An arrangement made at fifty and used at eighty accumulates for three decades.
And it is capped in dollars rather than by annual room, which is a different design from every other Canadian shelter and produces the erosion problem described below.
We are not suggesting anyone should prepay a funeral for tax reasons, and the sums involved are modest by design. The point is that this is a real exemption in a system that mostly offers deferral, and it is worth understanding on its own terms.
The Contrast With Ordinary Prepayments
A comparison this series is well placed to draw. This section is our own analysis.
Elsewhere we have addressed what happens to a business that takes money before it does the work. A gym selling annual memberships, a software business billing a year ahead, a landscaper selling a season contract. The general position is that the money is income when received, with relief available only through the reserve provisions and their conditions.
The funeral and cemetery sector received something quite different: a purpose-built statutory regime under which the funds sit outside the tax system entirely while they wait.
Two observations.
The distinction is not about the commercial substance, which is similar. Both are money taken now for services later, held for a long period.
It is about the social purpose Parliament attached to it. Commentary records that in 1995 the federal government amended the Act to implement measures relating to prepaid funeral arrangements, setting out rules allowing for tax-free build-up of income earned on contributions[6].
The practical lesson for a funeral or cemetery business is that it operates under a regime other prepayment businesses do not have, and that the regime's protection is conditional on staying inside a definition. Losing that status does not leave the business where an ordinary prepayment business sits. It leaves it holding funds that have been accumulating income for years on an assumption that turned out to be wrong.
What Qualifies As An Arrangement
The definition, which is narrower than the commercial concept.
An eligible funeral arrangement at a particular time means an arrangement established and maintained by a qualifying person solely for the purpose of funding funeral or cemetery services with respect to one or more individuals[2].
The definition then requires that each contribution made before the particular time under the arrangement was made for the purpose of funding funeral or cemetery services to be provided by the qualifying person with respect to an individual[2].
Three elements worth isolating, ours.
The arrangement must be established and maintained by a qualifying person. It is not something a customer can set up independently.
The word solely appears twice in the structure: solely for the purpose of funding those services, and each contribution made for that purpose. An arrangement with a mixed purpose is outside.
And the services must be provided by the qualifying person who holds the arrangement, which ties the money to a specific provider rather than to a general entitlement.
That last point matters commercially. A prepaid arrangement is not portable in the way a bank deposit is, and the transfer provisions discussed below exist precisely because moving between providers raises questions the ordinary definition does not answer.
Two Structures, Not One
A point where commentary and statute do not quite line up.
Commentary describes an EFA as structured as an irrevocable Trust[6].
The statute contemplates something broader. Its definition of custodian includes, at paragraph (b), in any other case, a qualifying person who receives a contribution under the arrangement as a deposit for the provision by the person of funeral or cemetery services[2].
The phrase in any other case indicates that paragraph (a), which we did not obtain, deals with a trust, and that paragraph (b) provides for the alternative.
So on the statutory language there appear to be at least two shapes: a trust with a trustee, and a deposit held by the qualifying person itself.
Two observations, ours.
A business or purchaser reading commentary that describes only the trust form may not recognise its own arrangement in the description, and may wrongly conclude it is outside the regime.
And the two structures put the money in different places, with different consequences on insolvency, different provincial regulatory treatment and different practical control. That is a substantive difference rather than a technical one.
We flag that we did not obtain the full custodian definition and are reasoning from the fragment we have. Anyone whose analysis depends on which structure they hold should read the definition itself.
What The Services Cover
The scope, which is more concrete than most statutory definitions.
Cemetery services with respect to an individual means property, including interment vaults, markers, flowers, liners, urns, shrubs and wreaths, and services that relate directly to cemetery arrangements in Canada in consequence of the death of the individual, including, for greater certainty, property and services to be funded out of a cemetery care trust[2].
A cemetery care trust is defined as a trust established pursuant to an Act of a province for the care and maintenance of a cemetery[2].
Commentary reports that subsection 148.1(1) defines funeral services as services directly related to funeral arrangements in Canada in consequence of the individual's death[6].
Three observations, ours.
The cemetery definition expressly covers goods as well as services, and the itemisation down to shrubs and wreaths suggests Parliament wanted no argument about it.
Both definitions require the arrangements to be in Canada. An arrangement funding services elsewhere raises a question we did not research.
And both are tied to consequence of the death of the individual, which links the whole regime to a specific person rather than to a family or an estate.
The Three Limits
The ceiling, stated per individual rather than per arrangement.
The definition requires that for each such individual, the total of all relevant contributions made before the particular time in respect of the individual does not exceed the applicable figure[2].
The statute gives $15,000 where the arrangement solely covers funeral services with respect to the individual, and $20,000 where it solely covers cemetery services[2].
Commentary supplies the third figure: $35,000 if the arrangement covers both funeral services and cemetery services for the individual, and notes that the limit includes contributions to a cemetery care trust[6].
Two observations, ours.
The combined figure is exactly the sum of the two separate ones, which we verified. There is no bonus for combining and no penalty.
And the limit is per individual, lifetime, across relevant contributions, not per arrangement or per year. That is what makes the tracking problem described below real.
Commentary describes the limit as one on the amount of contributions that can be made on behalf of an individual for whom services are to be provided under the arrangement[6], which is the correct framing: the ceiling attaches to the person the services are for.
Figures That Appear Never To Have Moved
An observation we make carefully, because it rests on what we did and did not verify.
Commentary dates the regime to 1995[6].
The version of the section we accessed that is labelled as in force from 2004 to 2013 gives the limits as $15,000 and $20,000[2]. The consolidated text we accessed gives the same figures[1], and a commentary source published in 2025 gives the same three figures[6].
So across sources spanning roughly two decades, the numbers are identical.
We are stating that as an observation about our sources, not as a verified claim about the legislative history. We did not trace amendments, and a reader must confirm the current figures rather than rely on ours.
If the observation holds, the design consequence is worth spelling out, and it is ours.
Almost every other dollar threshold in Canadian tax that matters to individuals is indexed. Bracket thresholds, credit amounts, the capital gains exemption and contribution room in registered plans all move.
A fixed dollar ceiling on a shelter designed to hold funds for decades behaves differently over time from an indexed one, in a direction that only runs one way.
What A Fixed Limit Buys Later
The sensitivity, computed by us and offered as illustration rather than as a claim about actual costs.
We did not verify any inflation figure or any funeral cost index, and we are not asserting one. What we can show is what a fixed ceiling does under different assumptions.
If relevant costs since the limit was set have risen by a factor of 1.5, then $35,000 funds the equivalent of roughly $23,333 at the original price level, being about 67 percent of the original purchasing power.
At a factor of 2.0, roughly $17,500, or 50 percent.
At a factor of 2.5, roughly $14,000, or 40 percent.
Two consequences, ours, and both are conditional on the observation above holding.
A ceiling that was generous relative to costs when set becomes progressively binding, so a purchaser who wants to fund a complete arrangement may find the shelter does not stretch to all of it.
And the risk of breaching it rises over time for exactly the same reason, which means the cliff described next becomes more likely to be encountered rather than less.
The Cliff And Who It Takes With It
The consequence of exceeding the limit, which commentary states starkly.
It warns that it is critical that the above limit is never exceeded as the EFA would no longer be a qualified EFA thus losing the tax exemption[6].
And it draws the practical inference: given how the limit is determined, it is advisable that an EFA be used only for the benefit of one individual, in the event that an excess contribution does not inadvertently put the EFA offside for all members of the entire EFA[6].
That follows from the statutory structure, and this is our own reading of why.
The definition requires that for each such individual the limit is not exceeded[2]. It is a condition of the arrangement qualifying.
So the failure is not confined to the excess or to the individual it relates to. The arrangement stops meeting the definition.
Our own illustration of the exposure. Take an arrangement covering six individuals, each at the $35,000 limit, holding $210,000.
One individual over by a single dollar puts the arrangement outside the definition. The exposure is not the one dollar. It is the exemption on the whole $210,000, and on everything it has accumulated.
Which is why the commentary's advice to use one arrangement per individual is not fussiness. It is the containment of a risk whose consequence is wildly disproportionate to its cause.
What The Exemption Is Worth
The amount at stake, computed by us on illustrative rates.
At $35,000 earning 5 percent, annual income is $1,750, worth roughly $759 of tax at an assumed 43.35 percent rate if the exemption failed.
Across a $210,000 arrangement, roughly $10,500 of income and $4,552 of tax a year.
Annual figures understate it, because the income is interest and compounds.
On our own figures, $35,000 at 5 percent over 20 years reaches roughly $92,865 inside the exemption, against roughly $61,189 if the income were taxed annually at 43.35 percent. A difference of about $31,676, which is close to the original contribution.
Two cautions. Every rate is assumed, and the tax rate applied is a personal marginal rate which may not be the one that would actually apply depending on whose income it became.
The structural point is what matters: over the timescales these arrangements run, the exemption is worth an amount comparable to the contribution itself, which is why the definition is worth staying inside.
Contributions Follow The Individual
An anti-avoidance feature built into the counting rule.
The definition of relevant contribution includes such portion of a contribution to another arrangement that was an eligible funeral arrangement, other than any such contribution made by way of a transfer from any eligible funeral arrangement, as can reasonably be considered to have subsequently been used to make a contribution under the particular arrangement by way of a transfer from an eligible funeral arrangement for the purpose of funding services with respect to the individual[1].
That is dense, and this is our own reading of what it achieves.
Amounts transferred in from another arrangement carry their history. The original contribution counts against the individual's limit in the receiving arrangement.
The exclusion for contributions that were themselves transfers prevents double counting, so an amount moved twice is not counted twice.
The effect is that a person cannot reset the ceiling by moving providers. Contributing $35,000 with one funeral home, transferring it, and contributing $35,000 again does not produce a compliant arrangement.
That is sensible drafting. It creates a practical problem for the receiving business, which the next section addresses.
Knowing What Another Provider Received
The operational consequence. This section is our own analysis.
The limit is measured on all relevant contributions in respect of the individual, and relevant contributions include amounts that originated with a different provider.
So a funeral home accepting a transfer, or accepting a new contribution from someone who may have an arrangement elsewhere, needs to know something it has no independent way of discovering.
There is no register we are aware of. There is no annual statement of remaining room, of the kind a registered plan produces. The business is relying on what the customer tells it.
Three consequences.
A customer who forgets or misremembers an arrangement made years earlier, possibly by a parent on their behalf, can put a new arrangement offside without anyone acting in bad faith.
The consequence of that error falls on an arrangement that may cover other people as well, on the analysis above.
And the business is the party that must maintain the arrangement within the definition, so it carries the compliance consequence of a fact only the customer knows.
The practical response is a written declaration from the purchaser recording all prior arrangements in respect of the individual, obtained at the outset and updated on any further contribution. That does not make the arrangement compliant if the declaration is wrong, but it establishes what the business asked and what it was told.
Who Is Taxed If It Fails
A question with a less obvious answer than it appears. This section is our own analysis.
If the exemption does not apply, the income does not automatically land on the purchaser. It lands on whoever would ordinarily be taxable on it, which depends on who is entitled to it.
Under a trust structure, that turns on the trust's terms and the ordinary rules for trust income.
Under a deposit held by the qualifying person, it turns on who has the legal entitlement to the interest.
That distinction is not academic, and CRA has addressed it directly in a context that is worth setting out in full.
The Slip That Should Not Be Issued
A CRA position from 1996 that resolves the previous question in one common case.
CRA states that where a particular type of prearranged funeral plan exists, its opinion is that a T5 slip for the interest income earned each year on the contribution to the plan should not be issued to the purchaser, since it is the funeral home, and not the purchaser, that has the legal entitlement to receive the interest income and is the recipient of that amount[3].
And then the sentence that matters most: this opinion applies even where the contributions made in respect of an individual for the provision of funeral services exceed the $15,000 contribution limit contained in the definition[3].
Two consequences, ours.
Losing eligible funeral arrangement status does not automatically make the purchaser taxable. The income still has to land somewhere, and that is determined by legal entitlement rather than by the failure of the exemption.
Where the funeral home is entitled to the interest, the failure of the exemption points at the funeral home, not the customer.
That is a materially different exposure profile from the one a business might assume, and it points the compliance risk squarely at the business rather than at the family.
We flag firmly that this is a 1996 technical interpretation given to another taxpayer on a described plan type[3], that it does not bind CRA in respect of anyone else, and that it turns on the legal entitlement in that particular arrangement. It should not be read as a general rule about who bears the tax.
Two Rulings, Opposite Answers
The clearest evidence that structure decides this, and the most useful thing in this article for anyone designing an arrangement.
In a 2007 ruling, the purpose was to establish an insurance policy with an annual growth component that would build over time to generate funds to cover the cost of funeral goods and services at the taxpayer's death. CRA ruled that the purchase of the Policy and the subsequent assignment of the Policy to Funeral Home will not qualify as an eligible funeral arrangement[5].
In a 2012 ruling, the purpose was to establish an eligible funeral arrangement with a funeral home to fund funeral services with respect to the taxpayer. CRA ruled that the New Agreement will qualify as an eligible funeral arrangement as defined in subsection 148.1(1), and that pursuant to paragraph 148.1(2)(a) no amount accrued, credited or added in respect of the policy would be included in the income of the funeral home or the taxpayer under section 12.2[4].
Both concern insurance policies and funeral homes. The answers are opposite.
We did not obtain the full facts of either and we are not going to explain the difference, because doing so from the fragments we have would be speculation dressed as analysis.
What we can say is what the pair demonstrates, which is the subject of the next section.
What That Tells You
The inference, which is ours and which we think is the practical takeaway of the whole article.
Qualification does not follow from the commercial objective. Both taxpayers wanted the same thing: money set aside to pay for a funeral, growing until needed. One arrangement qualified and one did not.
It follows from how the arrangement is constructed: who establishes it, who maintains it, what is contributed, to whom, and what instrument holds the funds.
Three practical points.
A structure that looks equivalent commercially may sit on the wrong side of the definition, and the difference will not be visible to a purchaser.
The existence of a ruling practice in this area tells you the industry treats these as questions worth asking in advance, which is the right instinct given that the answer is binary and the funds sit for decades.
And a ruling obtained by someone else is evidence of reasoning rather than protection. The 2012 ruling carries CRA's notice that although believed correct when issued, it may not represent the Agency's current position[4], and the 2007 ruling is expressed as binding only on the taxpayer who obtained it and only if the transactions were completed as described[5].
A Carve-Out Worth Noticing
A limit on the exemption that we report without developing.
Paragraph 148.1(2)(c) provides that subparagraph 148.1(2)(b)(ii) shall not affect the consequences under this Act of the disposition of any right under an eligible funeral arrangement to payment for the provision of funeral or cemetery services[1].
Our own reading, offered tentatively.
Paragraph (b)(ii) shelters the disposition of an interest under the arrangement. Paragraph (c) carves out the disposition of a right to payment for providing the services.
Those are different things. One is the purchaser's side; the other looks like the provider's entitlement to be paid.
The practical situation we would expect this to reach is a funeral business selling or transferring its book of prepaid arrangements, where what changes hands includes the right to be paid for performing them.
We state that as a reading rather than a conclusion. We did not research it, found no commentary addressing it, and a business contemplating a sale of a prepaid book should take this specific provision to advice rather than assume the general exemption covers the transaction.
What The Auditor Actually Examines
The enquiry in practice. This section is our own analysis.
Contribution totals per individual, against the applicable limit, cumulatively rather than by year.
Whether an arrangement covers more than one individual, which determines how far a single breach reaches.
Transfers in from other arrangements, and whether the transferred history was counted.
What the arrangement covers, since the limit differs between funeral only, cemetery only and both.
Contributions to a cemetery care trust, which commentary states are included in the limit.
Whether contributions were made for the qualifying purpose, given the definition's repeated use of the word solely.
Who has legal entitlement to the accumulated income, which determines where any failure lands.
The third item is where we would expect the most difficulty, because it depends on information originating outside the business, and the fifth because a cemetery care trust contribution may be administered separately from the arrangement it counts against.
What Records Survive
A cumulative contribution ledger per individual, not per arrangement and not per year.
A signed purchaser declaration of any prior arrangements in respect of the individual, obtained at inception and refreshed on further contributions.
Transfer documentation recording the original contribution amounts carried in from another arrangement.
The arrangement documents themselves, establishing who maintains it, what it covers and which individuals it names.
Cemetery care trust contribution records, cross-referenced to the individual they count against.
Documentation of legal entitlement to income, which determines who bears tax if the exemption fails.
Any ruling obtained, filed with the arrangement terms it was given on.
What To Do
Confirm the current limits before relying on any figure. Ours come from published text including a version expressly labelled as historical, and we did not trace amendments.
Use one arrangement per individual. Commentary advises it precisely so that one excess contribution cannot put an arrangement offside for everyone in it.
Track cumulatively and per person. The ceiling is lifetime and attaches to the individual the services are for.
Ask about prior arrangements in writing. Transferred contributions carry their history, and no register exists to tell you.
Count cemetery care trust contributions. Commentary states they are included in the limit even though they may be administered separately.
Establish who is entitled to the income. CRA's 1996 position indicates that where the funeral home is entitled, no slip goes to the purchaser, even where the limit was exceeded.
Do not assume structures that look equivalent are equivalent. Two rulings on insurance-funded arrangements reached opposite conclusions.
Consider a ruling for a new product design. The answer is binary, the funds sit for decades, and the industry evidently uses this route.
Take a sale of a prepaid book to advice separately. There is a carve-out for the disposition of a right to payment for providing services which we have not researched.
Remember the exemption is worth roughly the contribution itself over a long holding period, which is the measure of what a breach costs.
The Limits Of This Analysis
Several caveats matter. This is not tax or legal advice. Everything is stated as verified in August 2026 and requires confirmation. We quote section 148.1 from published consolidated text, but one version we accessed is expressly labelled as in force from 2004 to 2013, and while the limits appear identically across our sources we did not trace legislative amendments and readers must confirm the current figures. Our observation that the limits appear never to have moved is an observation about our sources, not a verified claim about legislative history. We did not obtain subsection 148.1(3), which governs distributions from an arrangement, and this article does not describe it. We did not obtain the full custodian definition and reason about the two structures from a fragment. One ruling refers to a proposed subsection 148.1(4) and 148.1(5) and we did not establish whether those were enacted. We relied on three CRA documents given to other taxpayers, none of which binds CRA in respect of anyone else; one carries CRA's notice that it may not represent the Agency's current position, and the 1996 interpretation is expressed as an opinion on a described plan type. We did not obtain the full facts of either insurance ruling and deliberately do not explain why they differ. Our reading of the paragraph 148.1(2)(c) carve-out is tentative and unresearched. We did not research the GST/HST treatment of prepaid funeral arrangements at all, nor provincial regulation of prepaid funeral funds, which is substantial and which this article does not address. All arithmetic is our own, uses assumed rates of return and an assumed tax rate, and the inflation sensitivity is expressly a conditional illustration rather than a claim about actual costs. The rarity framing, the contrast with ordinary prepayments, the tracking analysis and the audit examination structure are our own.
Frequently Asked Questions
Is the growth inside a prepaid funeral arrangement really untaxed?
What are the contribution limits?
What happens if the limit is exceeded?
How would we know about an arrangement made with another provider?
If the exemption fails, is the customer taxed on the interest?
Can we fund an arrangement with an insurance policy?
References
- Government of Canada. Income Tax Act, RSC 1985, c. 1 (5th Supp.), section 148.1, consolidated text as published, on the definition of relevant contribution including such portion of a contribution to another arrangement that was an eligible funeral arrangement, other than a contribution made by way of transfer from an eligible funeral arrangement, as can reasonably be considered to have subsequently been used to make a contribution under the particular arrangement by way of transfer for the purpose of funding funeral or cemetery services with respect to the individual; on subsection 148.1(2) providing, notwithstanding any other provision of the Act, that no amount that has accrued, is credited or is added to an eligible funeral arrangement shall be included in computing the income of any person solely because of such accrual, crediting or adding; on paragraph 148.1(2)(b), subject to paragraph (c) and subsection 148.1(3), providing that no amount shall be included in computing a person's income solely because of the provision by another person of funeral or cemetery services under an eligible funeral arrangement, or because of the disposition of an interest under such an arrangement or an interest in a trust governed by one; and on paragraph 148.1(2)(c) providing that subparagraph 148.1(2)(b)(ii) shall not affect the consequences under the Act of the disposition of any right under an eligible funeral arrangement to payment for the provision of funeral or cemetery services. Note: primary legislation; we quote specific provisions and did not read the section in full, and did not obtain subsection 148.1(3). laws-lois.justice.gc.ca
- Government of Canada. Income Tax Act, section 148.1, version in force from 31 August 2004 to 25 June 2013, on an eligible funeral arrangement meaning an arrangement established and maintained by a qualifying person solely for the purpose of funding funeral or cemetery services; on the requirement that each contribution made before the particular time under the arrangement was made for the purpose of funding funeral or cemetery services to be provided by the qualifying person with respect to an individual; on the requirement that for each such individual the total of all relevant contributions made before the particular time in respect of the individual does not exceed $15,000 where the arrangement solely covers funeral services with respect to the individual, or $20,000 where it solely covers cemetery services; on the definition of custodian including, in any other case, a qualifying person who receives a contribution under the arrangement as a deposit for the provision by the person of funeral or cemetery services; on cemetery services meaning property including interment vaults, markers, flowers, liners, urns, shrubs and wreaths, and services relating directly to cemetery arrangements in Canada in consequence of the death of the individual, including property and services to be funded out of a cemetery care trust; and on a cemetery care trust meaning a trust established pursuant to an Act of a province for the care and maintenance of a cemetery. Note: an expressly historical version of the section; the limits appear identically in the consolidated text but we did not trace amendments and readers must confirm current figures. laws-lois.justice.gc.ca
- Canada Revenue Agency External Technical Interpretation 9532895, 31 May 1996, Prearranged Funeral Plans, as reproduced by a tax publication service, on CRA's opinion that where the described type of prearranged funeral plan exists, a T5 slip for the interest income earned each year on the contribution should not be issued to the purchaser, since it is the funeral home and not the purchaser that has the legal entitlement to receive the interest income and is the recipient of that amount; and on that opinion applying even where the contributions made in respect of an individual for the provision of funeral services exceed the $15,000 contribution limit contained in the definition of eligible funeral arrangement. Note: a 1996 technical interpretation given to another taxpayer on a described plan type, accessed through a secondary reproduction; it does not bind CRA in respect of anyone else. taxinterpretations.com
- Canada Revenue Agency Ruling 2011-0428171R3 (2012), Eligible Funeral Arrangement: Insurance Policy, as reproduced by a tax publication service, on the purpose of the proposed transactions being to establish an eligible funeral arrangement with a funeral home to fund funeral services with respect to the taxpayer; on the ruling that the New Agreement will qualify as an eligible funeral arrangement as defined in subsection 148.1(1); on the ruling that pursuant to paragraph 148.1(2)(a) no amount that has accrued, is credited or is added to the eligible funeral arrangement in respect of the Policy will be included in the income of the funeral home or the taxpayer pursuant to section 12.2; and on the issues raised including whether an amount would be considered distributed under subsection 148.1(3), whether withholding would be required under section 153, and whether a proposed subsection 148.1(5) would apply so that a proposed subsection 148.1(4) would not. Note: a ruling given to another taxpayer, accessed through a secondary reproduction, carrying CRA's notice that although believed correct at the time of issue it may not represent the Agency's current position; we did not obtain its full facts and did not establish whether the proposed subsections referred to were enacted. taxinterpretations.com
- Canada Revenue Agency Ruling 2007-0228701R3, Life Insurance and Eligible Funeral Arrangements, as reproduced by a tax publication service, on the purpose of the transaction being to establish an insurance policy with an annual growth component building over time to generate sufficient funds to cover or exceed the cost of funeral goods and services at the taxpayer's death; and on the ruling that the purchase of the Policy and the subsequent assignment of the Policy to the Funeral Home will not qualify as an eligible funeral arrangement as defined in subsection 148.1(1), the ruling being given subject to the limitations and qualifications in Information Circular 70-6R5 and binding on CRA provided the proposed transactions were completed as described. Note: a ruling given to another taxpayer, accessed through a secondary reproduction; we did not obtain its full facts and deliberately do not explain why its outcome differs from reference 4. taxinterpretations.com
- Lycos Asset Management. (2025, January). Eligible Funeral Arrangement, on the federal government having amended the Income Tax Act in 1995 to implement measures relating to prepaid funeral arrangements, setting out rules allowing for tax-free build-up of income earned on contributions made under an EFA; on an EFA being established for the sole purpose of funding funeral or cemetery services in Canada for the benefit of one or more individuals and being structured as an irrevocable trust; on a lifetime limit on contributions including contributions to a cemetery care trust of $15,000 where the arrangement covers only funeral services, $20,000 where it covers only cemetery services, and $35,000 where it covers both; on it being critical that the limit is never exceeded as the EFA would no longer be a qualified EFA, losing the tax exemption; on it being advisable that an EFA be used only for the benefit of one individual so that an excess contribution does not inadvertently put the EFA offside for all members of the entire EFA; on such income being treated as property income; and on subsection 148.1(1) defining funeral services as services directly related to funeral arrangements in Canada in consequence of the individual's death. Note: a wealth management publication; its description of the structure as an irrevocable trust does not fully align with the statutory custodian definition, which we discuss in the text. lycosasset.com
This article is provided for general informational purposes and is not tax or legal advice. One version of the statute relied on is expressly labelled as historical, and current limits must be confirmed. Subsection 148.1(3) was not obtained. Three CRA documents given to other taxpayers are relied on and none binds CRA in respect of anyone else. The GST/HST treatment of prepaid funeral arrangements and provincial regulation of prepaid funds are not addressed at all. All arithmetic is the authors' own and is illustrative only.