YES, young adults need wills too! Young adults often think there is no point in them making a will because they think they have not accumulated enough assets to worry. However, many young adults have a job, and they have a superannuation fund. When they become a member of a superannuation fund they usually take out life insurance through that superannuation fund*. So, when a young adult dies there will often be significant death benefits payable under their life insurance policy. Life insurance usually deceases the older you get. For example, life insurance purchased through an industry super fund may pay death benefits as follows (based on default insurance paid through Legal Super):
- Aged up to 24 – $220,000
- Aged 25 to 44 – $440,000
- Aged 45 to 49 – $280,000
- Aged 50 to 54 – $200,000
- Aged 55 to 59 – $160,000
- Aged 60 to 64 – $80,000
- Aged 65 to 69 – $40,000
Why does this mean young people need to make a will? Beneficiaries of death benefits (superannuation fund proceeds and life insurance benefits) can only be:
- Dependants of the deceased;
- Persons who are in an interdependent relationship with the deceased at the date of death; or
- The deceased’s Legal Personal Representative (executor appointed by a will, or administrator appointed when someone dies without a will (intestate)).
A dependant according to Superannuation Law is a spouse or de-facto partner (including same sex partners), and/or children of the deceased (including adopted and step children).
A person is an interdependant relationship according to Superannuation Law if they are in a close personal relationship, live together and where one or both persons provide financial, domestic and personal support to the other.
Often young adults are don’t have any dependants and are not in an interdependant relationship. Accordingly, the legal personal representative is the only valid beneficiary for superannuation or insurance death benefits. Death benefits paid to the legal personal representative form part of the deceased’s estate and are either distributed in accordance with the deceased’s will (where the deceased gets to say who their beneficiaries are), or in accordance with intestacy laws (where distribution will be in accordance with the terms of the Administration and Probate Act 1958 (Vic)).
Considering the above, young adults should make sure that they have properly contemplated who to nominate as beneficiary of their superannuation and life insurance death benefits. As the most appropriate death benefit nominee will usually be their legal personal representative, it is important that they also make a will, appointing who they would like to be their legal personal representative (executor) and stating who they would like to benefit from their estate proceeds (which would include their death benefits).
For questions about estate planning and superannuation please contact Fleur Craig of Armour-Craig Legal on (03) 5636 4986 or fleur@armourcraiglegal.com.au. Fleur offers reasonable fixed fees rates for wills and estate planning matters.
*Since 2020 life insurance is optional for superannuation fund members with non-manual occupations under 25 with a balance of less than $6,000 in their account.