Too many times, we hear “I am only young and I don’t have any assets—I don’t need a will”. However, it is arguably even more imperative that young people get a will than most other generations!
Remember the life insurance usually attached to your superannuation! Anyone that is working and has superannuation should have a will. Nearly everyone forgets that normally your superannuation policy has a life insurance policy attached to it, which could be your biggest asset if you pass away. So even if you don’t own any significant assets you still have a large payment that you should consider.
Remember you generally can’t nominate your siblings or your parents to receive your super! Time and time again we hear young people say “don’t worry I have signed a nomination and my siblings (or parents) will be getting my superannuation”. What they don’t realise is that superannuation benefits can only be paid to a very strict list of people in accordance with superannuation law and these include:
- Your Spouse (including a de facto spouse—see here for information on de facto relationships);
- Your Child;
- A person in an interdependent relationship with you; or
- Your Legal Personal Representative (i.e. the Executor of your will, or Administrator of your estate if you don’t have a will).
Even if you have filled out a form to nominate your sibling, the superannuation company often just accepts those forms, without ever actually checking to see if they are a valid beneficiary.
Once you pass away, if you don’t have a valid nomination, and there are no other eligible beneficiaries then the trustee of a superannuation fund is likely to pay to your ‘Legal Personal Representative’. This can have unintended consequences.
Ned is 19 years old and has worked at a building site as a labourer since he left high school. He lives out of home and is independent. He has minimal funds in his bank account and no other assets. However he does have $20,000 in superannuation and ($400,000 in life insurance which his superannuation fund pays for). He doesn’t have any children, partner or any other person in an ‘interdependent relationship’ so the superannuation fund trustee must pay to his ‘Legal Personal Representative’. Ned hasn’t signed a will, so his mother now needs to go through the expensive process of applying for ‘Letters of Administration with no will’ application (which is a court application to determine who receives the estate in accordance with legislation). The issue is that both of his parents are now eligible to receive his estate, so his Dad, who he has not seen since he was 5, now receives $210,000 of his estate.
Sarah is 22 years old and is currently studying at university and works casually at a bar. Her superannuation fund has $12,000 (but she also has $350,000 of life insurance which her superannuation fund pays for). She does have a boyfriend who she has been seeing for four years and they now live together in a rented apartment and share expenses. Sarah has nominated her sister Frances to receive her superannuation. Sarah passes away, and the superannuation fund sends a letter to Frances to ask her to prove how she was in an ‘interdependent relationship’. While Frances and Sarah emotionally support each other, they don’t live together nor do they rely on each other financially in any way, so the superannuation nomination fails. The boyfriend claims the superannuation as her de facto spouse and the trustee agrees and pays $362,000 to him.
Why does having a will change anything
In the above examples, if Ned wanted only his mother to get his superannuation, he could have signed a binding death nomination (BDBN) for 100% of his superannuation to go to his Legal Personal Representative and then signed a will to leave his estate to his Mum. Sarah also could have signed the same BDBN and signed a will to leave her estate to her sister in order to achieve what she wanted to do.
What should you do?
If you are young, or have any family members who are young, contact us now so that we can assist.
(02) 6279 4444