Latest Legal Blogs : estate planning
Is Your SMSF Ready For The End Of The Financial Year (EOFY)?
With the end of the financial year fast approaching, now is the perfect time to make some final checks and ensure everything is in order for your SMSF before 30 June. The following are some matters that you might want to know more about, particularly if you have taken advantage of some of the COVID-19 relief measures. If there is anything in this paper that you are unsure about, we encourage you to contact me to discuss your specific circumstances in more detail. Contributions From 1 July 2020, if you were under the age of 67 you were able to make voluntary contributions without meeting a work test. This was previously restricted to people below age 65. In addition, if 2020-21 is the first year that you no longer satisfied with the work test, you may still be able to make voluntary contributions under the work test exemption if you had a total superannuation balance (TSB) of less than $300,000 on 30 June 2020. Therefore, it is important to review your contribution strategies before 30 June 2021, to make sure you maximise your contribution opportunities whilst ensuring you are below your contribution caps. Non-concessional (after-tax) contributions are limited to $100,000 for the 2021 financial year and only available if your TSB was less than $1.6m on 30 June 2020. If you were under 65 at any time during the 2020-21 financial year, you can potentially contribute up to three times the non-concessional cap (or $300 000) at once. The maximum bring forward non-concessional contribution amount you can make will depend on your TSB on 30 June 2020. Please note that draft legislation to allow older individuals to make up to three years of non-concessional superannuation contributions under the bring-forward rules, has yet to be passed. Concessional (before-tax) contributions are limited to $25,000 for the 2021 year. You may also be eligible, subject to your TSB, to make larger concessional contributions if you have any unused concessional contribution cap from the 2019 financial year onwards. Where you have made personal contributions and intend to claim a tax deduction in 2020-21, it is important that you reconcile all employer contributions and salary sacrificed amounts to superannuation to make sure you do not breach the annual concessional contributions cap. It is also important to ensure that the relevant notice requirements are met so that you can claim a deduction. These annual limits will increase on 1 July 2021 to $110,000 for non-concessional contributions and $27,500 for concessional contributions. The Government also announced in the latest Federal Budget that the work test will be removed altogether to allow voluntary non-concessional contributions and salary sacrificed contributions to be made up to the age of 75. If passed, these changes are expected to be available from 1 July 2022. Investments & COVID Relief Measures SMSF trustees are required to value the fund’s assets at their market value as at 30 June each year in the annual financial accounts. Although it can be a straightforward process to value assets when it comes to term deposits or listed shares and managed funds, it can be quite difficult to ascertain the value of real estate or private companies and units trusts. When valuing SMSF assets, you must comply with the ATO valuation guidelines for SMSFs. Contact us if you have any questions or require assistance. For the 2020-21 financial year, getting the value of the fund’s assets correct is important in assessing the impact of COVID-19 on your superannuation benefits. It is even more important for SMSFs relying of the ATO’s in-house asset COVID-19 relief. These SMSFs will have till 30 June 2022 to ensure that in-house asset levels are reduced to less than the allowable 5% limit. For those SMSFs that took advantage of the property relief measures the ATO implemented to reduce rent in 2020-21, any form of rental relief must end by 30 June 2021. From 1 July 2021, COVID-19 will not be a valid reason for any rental relief and SMSF trustees will need to ensure that all rent is at an arm’s length rate. For those SMSFs with a limited recourse borrowing arrangement (LRBA), there are additional considerations. Where your SMSF was provided with COVID-19 loan repayment relief to assist in meeting loan repayment obligations, this relief should cease by 30 June 2021. From 1 July 2021, any LRBA should revert to the original terms of the loan to ensure that the arm’s length requirements continue to be met. Where the COVID-19 loan relief has resulted in a variation to the original term of the LRBA, provided that interest continues to accrue on the loan and you repay any deferred principal and interest repayments in accordance with the varied terms, the LRBA will be considered to be consistent with an arm’s length dealing. Meeting new pension requirements To help manage the economic impact of COVID-19, the Government reduced the minimum drawdown requirements by half on account-based pensions and market-linked pensions for 2020-21. The Government recently announced the 50% reduced minimum pension drawdown requirements will be extended for 2021-22. Whether or not you have taken advantage of this reduction, it is important that you reconcile all pension payments received to ensure you do not underpay the minimum pension payment required by 30 June 2021. Where this requirement is not met, SMSFs will be subject to 15% tax on pension investments instead of being tax-free. All pension withdrawals for 2020-21 must be paid in cash by 30 June 2021 and cannot be accrued or adjusted using a journal entry so it is important to attend to this as soon as possible. For example, if you are making pension payments via an electronic transfer, you need to ensure that online transfers show the money coming out of the fund’s bank account by no later than 30 June. $1.6 million transfer balance cap and total superannuation balance Ensuring that member’s benefits are shown at market value is important in calculating each member’s TSB and in determining whether a member will exceed their transfer balance cap (TBC). The $1.6 million TBC applies to SMSF members who are receiving a pension and limits the amount of tax-free assets that can support a pension. To track the relevant events against your personal TBC, SMSFs are required to lodge with the ATO a transfer balance account report (TBAR). The TBAR is separate to an SMSF’s annual return and TBAR lodgment obligations, depend on members’ TSBs. With the general TBC set to index to $1.7million on 1 July 2021 it is more important than ever to ensure that all your TBAR lodgments are up to date and that you seek help incorrectly calculating your entitlement to any proportional indexation of the TBC. How can we help? If you have any questions, require assistance, or would like further clarification with any aspect of your end-of-year superannuation matters, please feel free to give me a call to arrange a time to meet and discuss your particular requirements in more detail.
Superannuation Death Benefit Limitations
If you are an SMSF trustee, you need to take special care when paying death benefits as you are responsible for ensuring that the payment rules are met. Strict rules apply, affecting who can receive a death benefit, the form in which the death benefit can be paid and the timing of such a payment. Firstly, death benefits can only be paid either to dependants of the deceased member or the estate of the deceased. Second, the law limits the group of dependants who are eligible to receive a pension on the death of the deceased member. Finally, trustees must pay a death benefit as soon as possible after the death of the member. Additionally, each death benefit interest can only be paid to each dependant as either: a maximum of two lump sums (an interim and final lump sum), or a pension or pensions in retirement phase, or a combination of both. It is the limit of a maximum of two death benefit lump sums per dependant that trustees need to keep track of to ensure that the cashing rules are not inadvertently breached, especially where the death benefit is being paid as a pension. Given the account-based nature of death benefit pensions that can be paid by an SMSF trustee, an SMSF member is generally afforded the flexibility to nominate to convert a death benefit pension into a lump sum payment. This process is generally referred to as the commutation of a pension although may be subject to specific restrictions found in a trust deed. A partial commutation is where the beneficiary requests to withdraw a lump sum amount less than their total pension entitlement, allowing their death benefit pension to continue. This is common where members withdraw their required minimum drawdown as a pension with any additional income needs met by accessing multiple lump sums from their pension account. This strategy allows the death benefit pension to continue without breaching the superannuation death benefit rules, despite payments in excess of the maximum two lump sum limit. A full commutation will result in the death benefit pension ceasing at the time the member decides to withdraw their entire pension entitlement as a lump sum. Despite the number of lump-sum death benefits previously received, the law allows the beneficiary to roll over the lump sum resulting from a full commutation to another superannuation fund for immediate cashing as a new death benefit pension. However, where a lump sum resulting from the full commutation of a death benefit pension is paid out of the superannuation system, further clarity is being sought from the ATO to ascertain whether or not this will be treated as an additional lump-sum death benefit that would count towards the maximum two lump sum cashing limit. Until further clarity is provided by the ATO, caution needs to be exercised before a death benefit pension is fully commuted and paid to the dependant, especially where the dependant has previously received a lump sum death benefit. As an SMSF trustee, you need to be aware of the restrictions placed on the payment of death benefits to eligible dependants of a deceased member. Trustees who ignore these limitations risk breaching superannuation standards and potentially being liable to be fined by the Regulator. How can we help? If you need assistance with the payment of a death benefit from your SMSF, please feel free to give me a call to arrange a time to meet so that we can discuss your particular requirements in more detail.
Changes to the Enduring Power of Attorney and Advanced Health Directives Form from 30 November 2020
An Enduring Power of Attorney allows you to nominate someone you trust to make decisions for you if you lose the capacity to make decisions for yourself, these decisions include matters pertaining to personal, health and financial matters. An advance health directive allows you to give direction about your future healthcare when you are unable to make your own healthcare decisions. From 30 November, 2020 a new standard Enduring Power of Attorney Form and Advanced health Directive Forms will be rolled out by the Queensland Government. There are legal requirements that are applicable to both of these documents and you need to be aware of these changes. These documents are even more important than a properly made Will. You are still alive when they might be taken from the safe and dusted off. So getting it right is very important. New capacity assessment guidelines There are also new Queensland Capacity Assessment Guidelines in effect from 30 November 2020. The capacity guidelines provide general information about capacity, capacity assessment and the legal tests of Capacity in Queensland. An adult with capacity has the right to make legally recognised decisions about their life, such as health care choices, support services, where they live, how they manage their finances and who they wish to appoint as attorneys. The presumption is that all adults have capacity to make decisions on their own until proven otherwise. When making an assessment of capacity, one needs to:- Identify the decision to be made. Identify a need to assess capacity. Apply the right legal test of capacity. Prepare for the assessment. Conduct the assessment. Document your conclusion and reasons. Changes to the Enduring Power of Attorney:- Within the Enduring Power of Attorney form you have the option to record your views, wishes and preferences within the document. This is to allow you, as the Principal, more opportunity to have a record of how you would like your attorneys to act on their behalf in respect to your wishes, such as recording the ability to be near friends and family if you were to lose capacity. The document also allows you to nominate a specific person to be notified by your attorney when they are going to make a decision in respect to a health, personal or financial matter. This allows you the option to have accountability between your attorneys when making decisions on your behalf. The new enduring power of attorney form limits the number of joint attorneys a principal can appoint to 4. This limit does not apply to attorneys appointed for health matters under an advance health directive. Changes to the Advance Health Directive:- Similarly, the Advanced Health Directive allows you to record your wishes and preferences when you are unable to make your own healthcare decisions. The document allows you to record health matters that are of concern to you and to consider matters that are important for your quality of life such as, the idea of living in your own home. It is important to note that this document does not provide your attorney or medical professionals with instructions on your health care but allows you the opportunity to let your attorney and other people know about your views, wishes and preferences about your health care. Eligibility requirements for appointed attorneys In addition to the existing eligibility requirements, those who are appointed to act on behalf of a principal under an enduring power of attorney or advance health directive must:- have capacity for a matter and/or health matters; and not have been a paid carer for the principal in the previous 3 years before their appointment; not be a service provider for a residential service where the principal resides. Greater accountability If an attorney does not act in accordance with their duties or obligations under the guardianship legislation, QCAT can now order a current or former attorney, administrator or guardian to pay compensation for the adult’s loss. QCAT can also order a current of former attorney, administrator or guardian to file records and audited accounts of their dealings and transactions entered into on behalf of the principal. QCAT or the Supreme Court of Queensland have been provided with additional powers to order that an attorney, guardian or administrator account for any profit accrued as a result of the attorneys failure to comply with their duties and obligations. If you are in a position where you would like to consider preparing an Enduring Power of Attorney or Advance Health Directive please contact Jessica Douglas on 4729 6643 or Erlinda Nunn on 4729 6638 who will be able to help you.
A Trust, the Family Court and sound Estate Planning advice
When considering your estate plan, you will often want protection over your hard earned assets. The creation of a testamentary trust in a will can provide taxation benefits and asset protection. Under this type of (very simple) structure, the ultimate control and legal ownership of the estate assets is held with the trustee. This means that the beneficiaries do not legally own the assets of the trust; they merely have a right to be considered in the distribution of the income or capital of the trust. Protection is afforded against bankruptcy and relationship breakdowns. In the recent case of Bernard & Bernard [2019] FamCA 421 (‘Bernard’) the Family Court considered whether assets held in a testamentary trust should be considered matrimonial property and available for distribution despite the marriage breakdown and divorce proceedings. Generally, the Family Court will consider a number of factors when determining a property division such as:- What assets form part of the ‘property pool’; What assets are held individually or jointly; Whether there are any business assets; Any inheritances received; Superannuation; and Any assets held in trust structures. The Facts of Bernard This case involved proceedings for a property division under section 79 of the Family Law Act following their separation. The Wife argued that as a beneficiary under a testamentary trust her husband had an interest in the property belonging to the trust and that the Court should have included the assets of the trust in the property pool. The Husband argued that the assets of the trust should not be included in the property pool as he was not a trustee and did not have any control over the assets or income of the trust. The facts of the Bernard case were as follows:- The Husband and Wife married in 1998 and separated in 2015 and eventually divorced in 2017. The Husband’s father made a will in 2012 which created a discretionary testamentary trust for the Husband (the Mr Bernard Family Trust) and one for his sister (the Ms C Bernard Family Trust). The Husband’s father passed away this same year. The Husband’s father’s estate was worth approximately $3.5mil and comprised of bank accounts, shares and commercial and residential property. The father’s will created two testamentary trusts, one for each of his children. The Husband was the trustee for his sister’s trust and his sister was the trustee of his trust and they were the primary beneficiaries of each other’s trusts. In December 2012, the Mr Bernard Trust and the Ms C Bernard Trust conducted business together in partnership for profit through the Bernard Family Will Trust partnership (‘the Q Partnership’). The Q Partnership owned all of the shares of the deceased. Mr Bernard and Ms C did not own any of the deceased’s shares in their personal capacity. The Wife argued that the testamentary trusts created by the deceased’s will were ‘mirror trusts’ and that the assets of the Husband’s trust were his and the assets of the sisters trust were hers. The wife argued that a distribution of the income generated by the Q Partnership had not been distributed for the financial year and that an application could be made that the income must be set aside for the benefit of the primary beneficiary i.e. her former husband which therefore becomes a part of the property pool. The Husband and his sister as trustees made a resolution to deal with the income of the trusts into the future. It was resolved that renovations would need to be completed to the deceased’s commercial property, the V Company would be appointed to carry out those renovations, that the trust would need to keep funds for the renovations and that the trust will need to ‘hold all distributions to beneficiaries, other than the distributions to cover income tax instalments generated by the trust, until completion of the renovations’. The Husband and his sister (who was joined to the proceedings as a second respondent) argued that the resolution made was an enduring resolution and that the undistributed accumulated income was being held for the specified use, namely the renovations to be carried out on the deceased’s commercial property. The Decision The Court ultimately held that the Husband’s testamentary trust should not be included in the property pool. Why? Upon construction of the Trust Deeds, Justice Henderson found the Husband was not the settlor or the trustee of his trust, rather he depended on his sister (the trustee of his trust) to accumulate and exercise her discretion to distribute income of the trust. The Court also found that Mr Bernard and his sister did not purport to exercise control over the assets in their trusts. The Husband was deemed to be a discretionary beneficiary and did not hold any other entitlement and the assets were never matrimonial property as the assets were not acquired during the marriage. This differed to the case of Kennon v Spry were the Court found the husband as the settlor and trustee of the family trust had control over the assets (which were considered assets of the marriage) of the trust. The trusts in the will of the deceased created an obligation for the Husband to act as his sister’s trustee and vice versa. Each of them had an obligation and a duty to each other as primary beneficiaries, as well as the other members of that class including the children, grandchildren and great grandchildren of the deceased. An example of a breach of their duties would include if the sister distributed all the assets and income to the husband but failed to consider the other beneficiaries of that trust. What the case of Bernard demonstrates is that the deceased received sound planning advice to provide the ultimate protection of his assets to ensure his beneficiaries would enjoy their benefit of the estate without the assets becoming subject to a property division. Specialised estate planning advice should be obtained for each individual situation to maximise asset protection and minimise risks.
Dying Without A Will and The Intestacy Rules
In Queensland, if you pass away without a Will you are considered to die ‘intestate’. This means someone you might not have wanted as your executor could get to be in charge of your estate and there won’t be a document in place which governs how your assets are to be distributed. Having a valid and up to date Will ensures your assets are distributed to those who you would like to benefit from your estate rather than leave them to the rules imposed by law (which are known as the Intestacy Rules) The Intestacy Rules The rules for dealing with an intestate’s estate are outlined in Part 3 of the Succession Act 1981. The Intestacy Rules govern the distribution of your estate to your next of kin such as your spouse, de facto partner and children or grandchildren. If you are not survived by a spouse or children, then your estate is distributed to your family in the following order:- parents; brothers and sisters; nephews and nieces; grandparents; then uncles, aunts and cousins (no more remote than your first cousins) There are some people who will never benefit from an intestate estate such as your parents-in-law or a step-parent. Grant of Probate v Grant of Letters of Administration An application for a grant of probate is made to the court by an executor appointed by a Will. A grant of probate confirms the validity of a will and that an executor has the authority to deal with the assets of the estate. On the other hand, an application for a grant of letters of administration is made to the court where there is no Will (or where a nominated executor has died or they have renounced i.e. they have decided they do not want to be the executor). Usually, the person with the greatest entitlement to the estate will apply to the court to be granted the formal right to administer. Rule 610 of the Uniform Civil Procedure Rules outlines in descending order of priority, the people who the Court may grant Letters of Administration to which are the deceased’s:- surviving spouse children grandchildren or great-grandchildren parents brothers and sisters children of brothers and sisters grandparents uncles and aunts first cousins anyone else the court may appoint Who gets what? Section 35 of the Act sets out a ‘formula’ of who will benefit from the estate and in what proportions, depending on the circumstances of the intestate. For example, if the intestate is not survived by issue (children) but is survived by one spouse, the spouse is entitled to the whole of the residuary estate. If the intestate is not survived by a spouse, issue or a parent, siblings, nephews and nieces and so forth, then the residuary estate shall be deemed ‘bona vacantia’ and the Crown (i.e. the State of Queensland) will get the lot. This predetermined formula can sometimes prove to be problematic as the intestate’s estate may have to be distributed between more than one surviving spouse or to a relative who did not have much contact with the deceased which may cause significant emotional and financial stress. The Solution? Well that’s easy! Make a valid will and perhaps a superannuation Binding Death Benefit Nomination to ensure your wishes are carried out and there is certainty for all. If you would like to make a valid will just contact us and we can let you know what we require and how much it will cost.
Estate Planning - What is it and why is it so important?
Estate Planning – What is it and why is it so important? The term Estate Planning may be recognized, by some, as just the involvement of a well-documented Will which outlines the wishes of a person after they pass away. However, we can all recognize that life changes, whether planned or unplanned and whilst having a Will is a key element in Estate Planning, there are more elements to consider that become a part of your Estate Plan. No matter what circumstances or what stage of life you are currently in, it is important to organize and maintain an Estate Plan. What is Estate Planning? Estate planning involves more than just a well drafted and carefully considered Will. Estate Planning can be viewed as a “holistic plan” that aims to review the structure of your personal and financial affairs to ensure that you are looked after during your lifetime and that upon your death your assets will be manages and transferred in accordance with your wishes, in the most financially efficient and tax-effective way to the right people. There are a number of elements that need to be considered when organizing your Estate Plan. Such matters to be considered include:- determining if there are sufficient assets in your plan that will meet your wishes. outlining the appropriate transfer of ownership, control, of assets and ensuring that they pass onto the appropriate person or entity; and that the relevant ownership or control passes to the beneficiary at the right time. Depending upon your circumstances and intentions, Estate Planning, involves a consideration (and possible changes to) documents such as Trust Deeds, Power of Attorneys, Shareholder Agreements as well as Wills to ensure that your intended beneficiaries actually benefit from your Estate upon your death. That being said, having an Estate Plan needs to be revised from time to time depending upon changes to your circumstances. Why is having an Estate Plan so important? Estate Planning is considered to be one of the most important things you can do for yourself as well as for your loved ones. Having an Estate Plan is designed to ensure that your affairs will be handled in accordance with your wishes when you pass, allowing you to have that peace of mind that your loved ones will be looked after and your wishes respected. Having a comprehensive Estate Plan allows you to:- ensure your children are looked after and are protected from creditors or future relationships breakdowns; ensure certain consideration are in place, such as tax implications, that may affect your estate; and ensure the legacy of your assets, such as ownership of multiple properties, companies or trusts are dealt with accordingly in line with your wishes. If you wish to talk to one of our lawyers about your Estate Plan please give our office a call to arrange an appointment. It is never too early and never to late to have your affairs in order.
Superannuation death benefits - review succession plans
Regardless of the size of your superannuation benefits, it is vital that you sort out your estate plans to ensure that you have a well prepared estate plan so that the right assets go to the right beneficiaries. You need to make sure that you get holistic estate planning advice and have arrangements in place to review your estate plans regularly. Estate plans are not to be set and forgotten. First and foremost it is important to understand that the payment of your superannuation death benefits are covered by the rules of your SMSF trust deed and do not automatically form part of your Estate for distribution in accordance with the terms of your Will. As trustee of your SMSF, you will need to make sure that you have read and understood your SMSF’s trust deed and that you comply with it at all times. On your death, one option is to rely on the SMSF trustee’s wide discretion to determine who, within the operation of the law, will receive your death benefit and how much each beneficiary will receive. The alternative is to remove the trustee’s discretion which gives you greater control in deciding how your superannuation death benefits will be cashed. This may be relevant if: You want certainty over your estate plan; You have a blended family and want all family members to benefit from your superannuation on your death; It is anticipated that there will be conflict amongst your potential beneficiaries; It is a possibility that there may be conflict amongst the remaining trustees of your SMSF upon your death; There is a risk that those controlling the SMSF post your death may not cash your death benefits in accordance with your preferences. Subject to the specific terms of your SMSF trust deed, ways in which you could consider removal of trustee discretion include: Having a valid and current binding death benefit nomination (BDBN) in place; Specifying in your SMSF trust deed how death benefits will be distributed; or Nominating a reversionary beneficiary to whom your pension will automatically revert to on your death.
SMSFs and the unexpected
Have you considered what you will do if an unexpected event occurs? Your SMSF is a long-term plan. Much can happen during this time; including illness, incapacity or death of a member. It is best practice to have contingency plans in place to deal with unexpected events. For example, if a fund member dies, leaving you as the sole member are you happy to continue with the SMSF? Outlined are some issues to consider planning for as trustees. Leaving the planning to when, and if an event happens may be too late.
Taxes and Death
Death Duties State and Federal death duties, were abolished Australia in 1970s. By and large taxing death is mostly accepted as part of life throughout the world (where a lot of planning is put in to trying to minimise or avoid the taxes altogether primarily through the establishment of trusts and divesting wealth offshore). For example, the amount of duty or tax payable as a result of death in the United Kingdom can be enormous - the current tax rate is 36% of the estate value (subject to adjustments) - so you can well imagine there is whole planning industry dealing with the topic. Whilst the prospect of a labor government reintroducing death duties was bandied about at the during federal election campaign (almost certainly falsely) I think it safe to say that no government of any persuasion would attempt to reintroduce them at any time in the near future. Just look what happened with Labor’s policy of abolishing franking credits was promptly rebranded “Retiree Tax” the Coalition. And the taxation of discretionary trusts is a real hot potato that seems to have been mashed for now. There are still taxation consequences for estates and their beneficiaries that should be planned for. Yes, with a little planning you can make your estate a whole lot larger for your loved ones.
Know your rights: new Charter to guarantee rights of aged care recipients
The Department of Health published a ‘Report on the outcome of public consultation on the draft charter of aged care rights’ in November 2018 which recognises ‘The Australian population is ageing, and the expectations of older people and the community are changing’. The Australian Government is taking steps to fundamentally reform the aged care system to ensure high-quality services are provided to aged care recipients. As part of these reforms, the Department of Health has introduced a single Charter of Aged Care Rights which is applicable to all recipients of Commonwealth subsidised aged care services.
Absolute discretion and the disappointed beneficiary
The Law and the Sea of Ethics Just when you thought you were comfortable about the advice you have been giving for years about trustees exercising absolute discretions vested in them along comes a case that questions everything you thought you might know. Or at least it jolts you out of your comfort zone. The law about a trustee who in terms of a trust instrument has a wide, absolute and unfettered discretion to make a decision (usually about what beneficiaries might receive) is reasonably settled. Generally speaking, there are limited grounds for a disappointed beneficiary to challenge the decision of a trustee. This is presumably the reason Daniel Katz of Katz v Grossman [2005] NSWSC 934 fame (having lost his case about his sister and brother in law being appointed trustees of his father’s SMSF) did not challenge their not surprising decision to pay 100% of a $1M death benefit to his sister leaving him with nothing (more on this below). Not that it might be readily apparent to Joe Blow (nor is it always evident) but the law floats on a sea of ethics. The Court has an inherent jurisdiction to supervise the administration of trusts and intervene if the circumstances are warranted. The difficulty is that a disappointed beneficiary needs a fair bit of bad behaviour by a trustee (and compelling evidence of that bad behaviour) to help their cause and cannot go to a Court cap in hand and just say “I don’t like the decision”. This is what is called ‘high risk litigation’.
On 1 July 2019 your insurance cover may be changing!
In February this year, the Government passed legislation which prevents trustees of APRA-regulated funds from providing insurance to members with inactive superannuation accounts, unless a member has directed otherwise. It is a common practice for many individuals with an SMSF to also have a secondary APRA-regulated fund which provides them with insurance. This may be done for two key reasons: To access insurance policies provided through large superannuation funds which are often cheaper. To keep legacy insurance policies which may offer better benefits or lower premiums than new policies, especially for older members. In these circumstances, it is most likely that people holding these polices through an APRA-regulated super fund will consider that their SMSF is their primary superannuation account and therefore receives all their contributions and roll-overs. It is usually the case that people will leave enough money in their APRA-regulated fund account to cover the cost of insurance premiums. Where required they may rollover funds from their SMSF to their APRA-regulated fund or make a contribution to pay for insurance premiums and administration fees to keep their insurance policy. Under the new legislation, you now may lose your insurance cover if your APRA-regulated fund is considered inactive because it has not received a contribution or a rollover for a continuous period of 16 months. At 1 July 2019, if your APRA-regulated fund is considered inactive for 16 months your insurance will be terminated. APRA-regulated funds had until 1 April to identify members who have been continuously inactive for six months or more and now have until 1 May to inform those inactive members that their insurance will soon be switched off unless they elect to retain it. We are concerned that insurance will be unknowingly closed for these accounts because members have not checked their correspondence, especially for those who rely on this insurance held separately. This could have a devastating impact on policy holders or their beneficiaries if their insurance cover was unknowingly terminated. Furthermore, it may be extremely difficulty or costly to try and access insurance at a later stage of life. So what can you do? It is important that if you wish to maintain your insurance cover that you take necessary steps as soon as possible. This includes either: Providing a direction to your APRA-regulated fund that you wish to ‘opt-in’ for your insurance cover to be maintained. Making a contribution or rollover to your ‘inactive’ APRA-regulated fund so that the period for which your fund starts to be inactive is reset. However, it stressed that you also ‘opt-in’. How can we help? If you are concerned you are going to be affected by these changes or need assistance with your insurance, please feel free to give me a call to arrange a time to meet so that we can discuss your particular requirements in more detail.
The Coalition wins a third term – your superannuation policy update in preparation for the end of the financial year
The Coalition Government has been re-elected in the 2019 Federal Election, with a small majority of seats in the House of Representatives, after taking a policy of stability for superannuation to the election. After the introduction of the significant legislative changes which came into effect on 1 July 2017, you may be relieved to hear that for at least the next three years we hope to have sustained stability for super. You may also be relieved to hear the proposal to ban refunds for excess franking credits and other superannuation changes will not be implemented. This means that you can focus on managing your financial needs rather than worrying about changing rules. Before the election, the Coalition did announce tweaks to the superannuation system that we anticipate will be implemented by the Government including: Guaranteeing no new taxes on superannuation. Greater flexibility for retirement contributions. From 1 July 2020, Australians aged 65 and 66 will now be able to make voluntary superannuation contributions, both concessional and non-concessional, without meeting the work test. Previously, this was only available to individuals below 65. This also includes extending access to the bring-forward arrangements to individuals aged 65 and 66 which allows individuals to make three years’ worth of non-concessional contributions to their super in a single year. Increasing the age limit for individuals to receive spousal contributions from 69 to 74. Reducing red tape for superannuation funds — exempt current pension income (ECPI) changes. The Government will streamline administrative requirements for the calculation of ECPI. Reducing costs for the super industry by including superannuation release authorities in electronic SuperStream Rollovers. The Government will provide $19.3 million over three years beginning in 2020-21 to the Australian Taxation Office (ATO) to send electronic requests to superannuation funds for the release of money required under a number of superannuation arrangements. Retaining limited recourse borrowing arrangements (LRBAs). Increasing the maximum number of SMSF members from four to six. Next steps With the end of financial year now fast approaching and certainty with the Government and its super policies it is the time to ensure everything is in place for your SMSF before 30 June. I have compiled some strategies that you may need to consider and ensure the plans you have in place are the best for you and your SMSF. Contribution caps Before 30 June you should: Review if you have any income available to contribute to your fund; and Review your total contributions to ensure they are below the caps. Non-concessional (after tax) contributions are limited to $100,000 for the 2019 financial year and concessional (before tax) contributions are limited to $25,000. Members under 65 years of age have the option of contributing up to $300,000 over a three-period depending on their total super balance. Transitional arrangements also apply to individuals who brought forward their non-concessional contribution caps in the 2016-17 financial year. Anyone making large superannuation contributions should exercise extreme care to avoid excess contributions. Making sure you do not exceed the contribution caps will save you both money and time of dealing with excess contributions. Contributions are included in a financial year if they are received in your fund’s bank account by 30 June. With 30 June falling on a Sunday this year, it would be prudent to make your contributions by Wednesday 26 June to ensure they are received by your fund prior to the end of the financial year. Drawing superannuation pensions If you are in pension phase, you need to ensure the minimum pension has been paid to you for this financial year. Where these requirements have not been met your fund will be subject to 15% tax on your pension investments, rather than being tax free. Personal superannuation contributions Most people regardless of their employment arrangement, can claim a deduction for personal super contributions they make to their fund until they turn 75. Individuals who are aged between 65 and 75 will need to meet the work test to be eligible to claim the deduction. If you wish to claim a tax deduction for personal contributions, you must complete and lodge a notice of intent with your fund before June 30 and have this notice acknowledged (in writing) by your fund. Any contribution also needs to be received by your fund before June 30. Co-contributions If you meet the relevant work tests and earn less than $52,697, it is also worth considering if you can take advantage of the Government super co-contribution. SMSF fund expenses For members in the accumulation phase, it is important that any expenses are actually incurred or paid before 30 June to be deductible in the current financial year. Rebalancing accounts between spouses The end of financial year is also the perfect opportunity to rebalance pension accounts between spouses, to ensure that super balances are as even as possible and the $1.6 million transfer balance cap is maximised for each member. Transfer Balance Account Reporting (TBAR) Funds that were paying a pension during 2018-19 will need to complete and lodge a Transfer Balance Account report with the ATO. The date of when you have to report depends on the size of your superannuation balance.
The Digital Afterlife - Social Media
Social media is a huge aspect of our day to day lives. From Facebook, Snapchat, Instagram, Twitter, LinkedIn, YouTube, Tumblr, WhatsApp – the list goes on and on. Whilst making a social media account can all be done with the click of a button (and more often than not without spending a cent), the cost of dealing with social media on death can cost your estate a hefty legal bill if you haven’t put a plan into place about what happens to your social media accounts on your death. There has been a string of recent litigation trying to untangle the complex issues about ownership of social media accounts and the content of the account on death. So what really happens to your social media account when you pass away? We have picked the top three social media platforms and given a run down on what happens to your account on death.
Retirement Villages v Aged Care Facilities
Getting older is a fact of life, and there may come a point where our living arrangements will have to change to accommodate lifestyle or healthcare needs. Before moving into a retirement village or an aged care facility, prospective residents will be given an agreement which sets out the rights and obligations of the resident and the provider. There are many things that need to be considered including the type of care required, and how you will pay either the Village or Aged Care Facility. Which Act governs the Agreement? Each agreement is governed by a different Act. The Retirement Villages Act 1999 (Qld) was enacted to promote consumer protection and fair trading practices in operating retirement villages and in supplying services to residents. Aged care agreements are governed by the Aged Care Act 1997 (Cth) which aims to provide funding of aged care, a high quality of care and accommodation for the recipients of aged care that meets the needs of the individuals and to protect the health and wellbeing of the recipients of aged care services.
Confessions of an Estate Planner: Part 10 Laying to Rest
When we lose the ones we love The end of a life for one person and the start of a new one for their beloved and those left behind is usually experienced with a whole host of raw emotions. Shock, fear, sorrow, guilt, loss, melancholy, relief, anger, helplessness, hostility, bitterness, pain, nostalgia, resentment, despair, amongst others are often encountered (separately and all at once). It never isn't emotional. Some deaths come at the end of a long life or a long illness and are expected. That doesn’t make things any easier. Others are untimely and come suddenly in that they are as a result of a diagnosis of an incurable disease with limited time to live, or an accident or homicide or suicide (which no one saw coming). Or the deceased is very young or in the prime of their life. Everyone reacts differently and everyone reacts the same and often words just do not do justice and cannot describe everything that is happening of what is being felt. What should be said or done? What shouldn’t be said or done? Often just being there is what counts and all that is needed. Everyone is affected in different ways and at different times. Soon after a loved one or dear friend has departed there is a funeral and a wake to prepare for and attend. It usually is all a blur. It can be stressful (apart from everything else). And then comes the after ……. and the thought of it. It is very easy to sink into the quicksand of your thoughts. The unknown future is a daunting prospect.
Confessions of an Estate Planner: Part 9 - Easy Death
“I’m not afraid of dying… I just don’t want to be there when it happens” Woody Allen. It is not surprising (after reading Confessions Part 7 and being exposed to some of the real life stories from the (other) Royal Commission into Aged Care Quality and Safety) that we are hearing more and more about Euthanasia (a term derived from the greek word ‘euthanatos’ which means ‘easy death’. The fear of death is ingrained into all of us (natural selection dealing with those who were, unfortunately, not naturally averse to death many millions of years ago) but we all accept that at some point it inevitable. The acceptance grows as we grow older. When we were young it was never going to happen to us. I think it is fair to say that most people accept that they will die but what they fear the most is that they won’t get lucky and die in their sleep peacefully or otherwise quickly and painlessly. They dread a long illness and dying alone, in hospital connected to all sorts of very expensive machines and computers, in severe pain, suffering immeasurable indignities daily under sedation and without any privacy or empathy. To put it another way “a living hell”.
Conflicts of Interest and Superannuation
In considering your estate plan you should at all times bear in mind that the courts will apply the strict fiduciary duties that the law casts on legal personal representatives, trustees of superannuation funds and others even if the outcomes may not be fair. Avoiding an expensive Supreme Court hearing about conflict issues is relatively easy if all or some of the following have been made:- a will which includes a suitably worded conflicts clause; a binding death benefit nomination; or a reversionary pension (if there is a pension being paid).
Confessions of an Estate Planner: Part 8 Enduring Powers of Attorney
I briefly touched on the topic of Enduring Powers of Attorney Part 7 (Crimes against the Elderly). Enduring Powers of Attorney (EPA) An enduring power of attorney enables you to appoint a representative to make financial (and other) decisions on your behalf, should you become incapacitated. It is a legal document in which you are able to nominate someone you trust to handle your affairs, should you lose the ability to make decisions for yourself. Without an enduring power of attorney, there may be nobody with legal authority to manage your affairs and make decisions on your behalf.
Confessions of an Estate Planner: Part 7 Crimes Against The Elderly
Unconscionable, Criminal and Invisible Taking advantage of the old, frail and vulnerable members of society is more prevalent now than it ever was. People are living longer, they have more money and many are developing mental illnesses such as Alzheimer’s Disease. It’s too easy and they are ripe for the picking. The property of the victim can be extracted from them by a variety of tried and tested ways including subtle manipulation, physical abuse, mental torture, undue influence, coercion as well as every day garden variety frauds and scams. It’s criminal. Although more often than not the conduct is not reported to the police due to embarrassment, lack of capacity or death. Even if reported, it is often quite difficult to secure a fraud (or other) conviction due to the required criminal burden of proof (i.e. beyond reasonable doubt) unable to be met. The conduct is always unconscionable even if a criminal conviction is not secured. Whilst difficult and costly, the civil courts and tribunals can put things right by making orders for damages and costs that penalise the offenders. And it is mostly invisible. It is happening in your neighbourhood or a retirement village near you every day. Right under your nose.
When should you update your Will?
There is no golden rule as to how often you should update your Will. It can be reviewed as often as you’d like however we typically recommended that you review it at least every 3-5 years to ensure it still reflects your wishes and current circumstances. There are some reasons why you may need to update your Will sooner. Some of those reasons are:- you get married, start a de facto relationship or enter into a civil partnership you separate from your spouse, get divorced, your marriage is annulled or you end a de facto relationship or civil partnership your assets or financial circumstances change you start a company or become a shareholder in a company any person named as a beneficiary in your Will passes away any person named as an executor, trustee or guardian passes away or becomes unable or unwilling to act due to age, ill-health or any other reason you want to change your beneficiaries, executors, trustees or guardians named in your Will (i.e. you have a child) you make a binding death benefit nomination on your super policy to pay the proceeds of your superannuation into your estate. If you would like to make an appointment to review your estate plan with one of our solicitors please call 4771 5664 or email law@connollysuthers.com.au
Confessions of an Estate Planner: Part 6 Estate Litigation - Claims of Children
If I ever was a child…… Estate Litigation This area of litigation is often called challenging a will. A will can of course be challenged if there is something wrong with it or how it was made or how it is to be read. At common law a willmaker is free to do as they wish. Just like anyone can decide to make a gift of something to someone during their lives. The common law has been changed by statute in most modern jurisdictions to allow certain eligible people (usually those closely related to the deceased) to be able to claim for better provision out of an estate (if adequate provision has not been made for them in circumstances where they should have been properly provided for). Societies demanded (and legislated many years ago) to protect the rights of wives and dependent children. This area of Estate Litigation is termed Testator's Family Maintenance and more recently Family Provision. Part 5 dealt with claims of spouses. This Part deals with the claims of children.
Superannuation Death Benefits - Review Succession Plans
The changes to superannuation announced in the 2016 Federal Budget have been passed by Parliament with the majority of reforms taking effect on 1 July 2017. One significant change relates to the introduction of the transfer balance cap (TBC) and the limit this imposes on the amount of capital that an individual can use to support a pension in retirement phase. To date, the prominent headlines relating to the TBC have targeted people in or approaching retirement with less focus on how the TBC impacts on what happens to your superannuation if you die. The introduction of the $1.6 million TBC applies to pensions paid to your dependants after you die (called death benefit pensions or reversionary pensions) meaning it has a substantial impact on estate planning.
I'm the Executor, what happens now?
Being asked to be someone’s Executor of their Will sounds prestigious and important. It can also be quite overwhelming when put on the spot and the pressure to accept can leave you saying yes to the role without really knowing just what you are signing up for. Executorship should not be accepted lightly – depending on the complexity of the Will and the nature of the assets, the job can be a big responsibility and can be very time consuming. Whilst most Estates can be finalised within 6 to 12 months, complex Wills or litigation can extend the finalisation of the Estate for many years! The first hurdle to jump is understanding exactly what an executor is and what the role entails. Simply put, an Executor is someone appointed under a Will who is responsible for administering a deceased person’s Estate. A Willmaker can appoint a person solely, or jointly with one or more people.
How a Testamentary Trust Will can help you and your family
Traditional Wills The Traditional Will allows you to: Appoint an executor, someone who carries out the provisions of your will, Appoint a guardian to care for any young children, Make specific gifts to individuals or charities, Distribute the rest of your estate; and Name alternative beneficiaries in a situation where your first preference beneficiary dies before you. Some Problems that arise with Traditional Wills The beneficiaries of a Traditional Will have no choice other than to take their gift in their own name or refuse it altogether. This lack of choice may cause tax and other problems. Possible solution - A Testamentary Trust A testamentary trust is simply a trust established in a will and does not come into existence until the Will maker dies. Until then your Will has no effect and you can change it at any time. Where a will maker requires that his estate and property (or part of it) be held on trust by a Trustee for a nominated person (eg your child) or a number of persons (Beneficiaries) the will maker can do so in his or her will by simply saying that a trust is to be created on his death for a specific purpose and for the benefit of the named Beneficiaries. The terms of the trust including the trustees powers are then set out in detail in the will. A trust created in this way is called a testamentary trust. If there are a number of Beneficiaries (such as 3 children of a marriage) the Trustee can be given the discretionary power to determine the entitlement of the Beneficiaries to the income and capital of the trust fund. Where these powers are given to a trustee the trust is said to be a Testamentary Discretionary Trust.
Confessions of an Estate Planner: Part 5 Estate Litigation - Claims of Spouses
Estate Litigation This area of litigation is often called challenging a will. A will can of course be challenged if there is something wrong with it or how it was made or how it is to be read. At common law a willmaker is free to do as they wish. Just like anyone can decide to make a gift of something to someone during their lives. The common law has been changed by statute in most modern jurisdictions to allow certain eligible people (usually those closely related to the deceased) to be able to claim for better provision out of an estate (if adequate provision has not been made for them in circumstances where they should have been properly provided for). Societies demanded (and legislated many years ago) to protect the rights of wives and dependent children. This area of Estate Litigation is termed Testator's Family Maintenance and more recently Family Provision. Part 5 deals with spouses.
What happens to my SMSF when I die?
In this article we discuss some misconceptions about SMSF life after a member's death. There are many misconceptions about what happens to a self managed superannuation fund (‘SMSF’) when a member dies. There may be some undesirable outcomes such as: the wrong people receiving the intended proportion of SMSF assets or superannuation; the wrong people being left in control of the SMSF; or a protracted, costly, and uncertain legal battle over SMSF benefits; if one of these misconceptions is relied upon. For wills and estate lawyers, acting on a misconception may potentially expose you to various liabilities and claims down the track. SMSF succession planning relies on existing trust law which was not developed with SMSFs in mind. In addition to that, generally SMSF law mainly focuses on how the funds should operate during the members’ lives. It does not specifically pass control of SMSFs to any people in particular or specify exactly how SMSF benefits must be paid upon death. SMSF law is relatively non-prescriptive on succession planning matters.
Confessions of an Estate Planner: Part 4 Superannuation Litigation
Superannuation Death Benefits With many people holding a sizeable part of their retirement savings (and investments) in Superannuation, and given the increasing number of cases in the courts where Superannuation Death Benefits are in dispute, I thought it would be best to devote Part IV to this ever growing area of practice. What may seem very simple, simply isn’t that simple given the variety of factors that come into play. All you need is someone sufficiently motivated to put everything to the test. Every family situation is different. Every Super Fund is different. And, there is not, as some may have you believe, a ‘one size fits all’ strategy. There are as many strategies for just as many varying scenarios and no one issue is complex (but putting it all together can be). And if you think that your Will covers your Super think again. Absent a properly made Binding Nomination, the payment of Death Benefits from a Super Fund is almost always in the discretion of the Trustee of the Fund (so it does not matter what your Will says). The Questions Here are some questions you should ask yourself (and provide the answers to your advisor):- Do you want flexibility or do you want to lock things down forever? Do you have an SMSF or are you a member of a Retail/Industry or Public Sector Fund? Does your Fund Trust Deed provide that the payment of a Death Benefit is in the absolute discretion of the Trustee? (don’t be surprised here – most do); Will your spouse/former spouse/defacto spouse/children/step children/children of your defacto spouse be happy or unhappy with what you have done (or haven’t done)? How does this fit in with the Will you prepared 10 years ago when your account balance was not as big as it is now? Is there potential for a claim to be made that the person making the decision about a Death Benefit has a conflict of interest (i.e. they are also the executor of your estate and bound to pay it to the estate)? What does your last Death Benefit Nomination say? Is it consistent with your Will? Is it consistent with the pension your accountant got you to set up? Are the nominated beneficiaries legally able to be paid a Death Benefit? What is the tax treatment of whatever it is you have done (or not done)? The reassuring thing is that most people lead such uncomplicated lives that by and large none of this will ever concern them or affect their loved ones greatly. In saying this, the seeds of most bitterly fought Superannuation disputes are sowed years before during the development of a blended family (commonly the biological children of the deceased at war with the most recent spouse of the deceased). There are also often disputes about whether or not someone is a spouse or not. There is layer upon layer of regulation (and recent superior court decisions about the conflicts facing estate executors who are also Superannuation Fund Trustees) to make it a lawyer’s paradise. I think you will agree that this is a fantastically ripe environment for litigation/mediation/court hearing processes (not to mention angst, stress and all of their companions) to be generated. Not the best experience for your loved ones and something that can in the majority of cases be avoided.
Top 4 reasons to have a Will
Having a Will is arguably one of the most important things you can do for yourself and your family as life is forever unpredictable and we truly do not know what is around the corner. While each person’s situation varies and the importance of a Will to some will be much greater than others, here are the top four reasons to have a Will. You can ensure your hard-earned assets are distributed to the people you want to receive the benefit of them; You have control over who is to administer your estate; making a Will enables you to choose an executor who will control and administer you estate after you pass away. An executor’s role includes locating your last Will, locating the named beneficiaries, collecting, looking after and sale of your assets where required, identifying and paying all debts and liabilities of your estate, preparing tax returns and distributing your estate pursuant to your wishes; You can indicate your preference of who will take care of your minor children. A Will allows you to nominate a person you trust (or exclude a person who you don’t) to take care of and raise your minor children as their guardian; In the event that you pass away without a Will, your estate is administered pursuant to the rules of intestacy meaning that your assets will be distributed according to the rigid laws of intestacy. The effect that intestacy can have on your loved ones can be catastrophic as it may force the sale of a family home to enable debts and liabilities of your estate to be satisfied and allow other entitled beneficiaries including children and other dependants to claim their entitled share of your assets.
Confessions of an Estate Planner: Part 3 An Uninsured Advisor
Part II Post Script: Before discussing the advisors you will be aware that the since Part II was published there has been a lot of public debate about the banks taking advantage of consumers. The Government has beefed up ASIC with $120,000,000.00 to go towards their watchdog functions. The Labor Opposition is calling for a Royal Commission. And the CBA is in the news again. The Financial Sector Union is alleging that CBA staff are being put under pressure to push products:- Click here to read "CBA staff pressured to push products, says Finance Sector Union" After a while it all starts sounding the same.
Confessions of an Estate Planner: Part 2 The Advisors
Part 2 - The Advisors Improving Australia’s Financial System “While consumers are responsible for the consequences of their financial decisions, they should be treated fairly. The financial services and products they purchase should perform in the way they are led to expect. Recent history provides a number of examples of product and advice failures. While the circumstances of each case differ, problems have arisen when commercial incentives have overridden consumer interests. We will do more to lift the standards of financial advisers, including by placing this activity on a professional footing for the first time. Following extensive stakeholder consultation, we will introduce legislation to make the issuers and distributors of financial products accountable for their offerings. This will ensure a stronger customer focus in product design and marketing. We will consult with stakeholders on the development of a new ASIC product intervention power that could be used to modify products, or if necessary, remove harmful products from the marketplace.” This is an extract from the Federal Government’s response (entitled “Improving Australia’s Financial System”) to the findings of the Financial Services Inquiry it commissioned in 2013. It was released on 20 October 2015. The full response can be found at this link, click here. The terms of reference of the Inquiry included the current cost, quality, safety and availability of financial services, products and capital for users. In late 2015 the Federal Government released draft legislation which requires that new financial planners will require a degree, undertake a professional year and pass examinations to be able to legally operate. Existing financial planners will be required to sign up to a code of ethics. An independent, industry-established body will be created from 1 July 2016 and will set education standards for existing planners who will be given until 1 July 2019 to complete an appropriate degree equivalent, if they do not already hold one.
Confessions of an Estate Planner: Part 1 The Estate Planning Conundrum
Part 1 - The Estate Planning Conundrum Retirement Planning (planning for your life after work) and Estate Planning (planning for the lives of others after your death) involve a mysterious web of rules, regulations and taxes overlayed on the family dynamic. Confusing to most and industries within themselves (where seemingly everyone not only the taxman is putting their hand in your pocket along the way and where you get different advice depending on the advisor and where everyone is telling you they know more than the others). There are conundrums and risks at every turn whether planning to live comfortably during your winter years or providing for your loved ones when you have departed. Getting your plan wrong can have disastrous consequences in this life and for your family in the generations to come. Getting it right can buy you something priceless. Peace of mind. If you are looking for a clear way forward the words that follow may be helpful. Behind despair hope is patiently waiting. Hopefully this confessional will help people:- gain a better understanding of the advice they receive make an informed decision to rely (or not) on that advice; assess whether or not they are getting value for money; make informed decisions about when and what they do in their planning (and see through the Estate Planning spin in its varying forms). It is a confessional as I have been witness to too many bad things. I need to clear the air, get it off my chest so to speak and tell the world. I am going to feel better once I have done this. I will attempt to provide a reality check and the right information on Enduring Powers of Attorney, Advance Health Directives, Estate Planning, Testamentary Trusts, Wills, Probate, Family Trusts, Family Law, protecting an Inheritance, Asset Protection, Estate Disputes, Estate Litigation, contesting Wills, Administration of Deceased Estates, Superannuation Death Benefits, SMSFs, Binding Death Benefit Directions & Nominations, Pensions, the Financial Planning Industry (including finding the right advisors) and the like. There is a lot of ground to cover and the confessions will come in instalments. There is too much to digest all at once. So let's start at the end - where we are now in 2016.