Finance Minister Jim Flaherty's latest budget contained the measure, an olive branch to the veterans community which has become increasingly disenchanted and vocal about their treatment.
The measure also removes a political thorn from the government's side ahead of next year's federal election, one that saw the country's largest veterans group conduct a letter-writing campaign.
The government was put on the defensive in 2012 when The Canadian Press revealed that the Last Post Fund, meant to assist veterans families with burial costs and a headstone, had rejected two-thirds of the requests put before it since 2006.
Last year's federal budget increased the amount of money available for funeral expenses by $65 million, but did not loosen the eligibility criteria, which have not been revised in decades. The individual entitlement was also raised to $7,376 from $3,600.
The funds announced Tuesday are in addition to those in last year's budget.
Throughout much of its existence the fund has been restricted to First and Second World War veterans, and those who fought in Korea.
The rules generally excluded modern-day soldiers who served during the Cold War and in Afghanistan, unless they happened to be in receipt of a veteran disability pension.
There's also a means test that says a qualifying veteran's estate must be valued at less than $12,010.
In order to meet the demand to bury modern-day veterans, the fund began making public appeals for donations.
Veterans Affairs Minister Julian Fantino was asked for comment on the budget Tuesday, but a spokesman declined.
Federal finance officials, speaking on background Tuesday, said eligibility has been opened up, but the means test remains the same.
The Royal Canadian Legion lobbied to open the Last Post Fund to modern-day veterans and had several face-to-face meetings with Flaherty.
Gordon Moore, the Legion's Dominion Command president, has said it was scandalous the fund had to undertake a private donation to bury as many as 29 veterans, whose families were denied support.
On Tuesday, Moore was happy that the families of the roughly 500 veterans who die each year in poverty will not be ignored.
"I am very pleased that the issue of a dignified funeral for the most vulnerable, low-income veterans has finally been resolved," Moore said.
But he quickly added that the Legion is disappointed the budget "did not address the urgent financial shortcomings of the New Veterans Charter," the government's marquee legislation that lays out the benefits and entitlements of ex-soldiers.
Our most vulnerable veterans continue to face a bleak future and financial hardship, Moore said.