Katie Timms: If death and taxes are certain, you should start planning as soon as possible

Death and taxes — the two things that are guaranteed in life, at least according to US statesman and founding father Benjamin Franklin.

And they are two things that many young people in particular often try to avoid or delay for as long as possible.

Countless young Australians fall into the trap of thinking that planning for death is something you do when you have a house or a family, or when you are a “real adult”. For many, it doesn’t seem like something that is necessary right now.

Of course, it’s scary to face the reality of the future, but avoiding these fundamentals of life can lead to additional complications and costs for those who are left behind in the event of an unforeseen tragedy.

So, what are the most common misconceptions people should be aware of?

I don’t have any assets

This is one that I hear all the time, and I fell into this trap as well.

If I don’t have a house, surely my parents can sort out my car and the little bit of superannuation I have?

You need to remember that if you have superannuation, you are likely to have life insurance and you will definitely have assets that need to be sorted out.

The beauty of compulsory superannuation is that, in addition to providing for retirement, it is often paying for life insurance that can provide essential support for your loved ones when you depart.

I don’t need a will

This one usually follows the comment about not having assets. And if we have assets then we need to make sure we have a will.

Not only does your will identify who should get your assets, but it also sets out who you want to distribute the assets, as the executor.

Being an executor isn’t the most fun job. But if you don’t have a will, your assets may be distributed according to the intestacy rules, which may not be what you want and you may have the wrong person in charge.

All I have is super, and that’s going to my parents

This is another trap that I fell into when I was younger.

When we start a job and receive forms from our superannuation fund that ask for a beneficiary, we often just put down our parents or a sibling, especially if we are not married or in a long-term relationship. Unfortunately, these nomination forms are a minefield to complete and it’s rare that your fund tells you they are wrong.

Because your superannuation is a separate asset held in a trust structure, it isn’t automatically captured under your will and it can only be paid to certain people.

These include a spouse, a child or someone who is either a financial dependent or an interdependent. This is where complications arise — parents or siblings may not be eligible to receive the superannuation. You can elect for them to receive it under your will, but then you need the will to make sure that happens!

There are no death taxes in Australia

While this might be technically true, there are still taxes on benefits received from superannuation, depending on who it is paid to and how the money went into super in the first place.

Making sure you understand all your assets and the different taxes that can apply can save thousands with just a little bit of planning.

It’s too hard! Let my family sort it out when I’m gone

For some people, this is absolutely true and you may have already glazed over at the thought of superannuation nominations and taxes and who should be the executor.

The most important thing to remember is that the death of anyone can be devastating, and the last thing we want to leave people with is a financial mess as well.

A will doesn’t have to be expensive or complicated, and understanding your superannuation and insurance might take only 10 minutes every three years.

Spending the money on a will now and the 10 minutes it takes could save your family hours of heartache in the future.

Katie Timms is the national director, superannuation and SMSF services at RSM Australia