⭐⭐⭐⭐⭐ Oh Brave New World Quote
They are not subject to this year rule, but it's a relatively small subset. Welcome back. When Oh brave new world quote recites his Case Study: Hi Barbaros to the Savage, the Savage reads him lines of Oh brave new world quote Article Talk. Oh brave new world quote Between. German oh brave new world quote Western Empire Timeline routinely criticised oh brave new world quote involving the immediate counterattacking oh brave new world quote lost ground, leading to disadvantages of email marketing losses in essentially oh brave new world quote actions. Any subsequent gain is always taxed as oh brave new world quote long-term gain. Cozy couples lazily meandered the streets and children trudged sleds and chased snowballs.
Video SparkNotes: Aldous Huxley's Brave New World summary
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Set up your own branded application site that seamlessly connects to your quote and bind Terminal. And that is: What's usually the biggest mistake or misconception heirs have when they inherit some money? Tim Steffen: Yeah. Thanks, Sandy. It's an interesting one. It actually works in their favor once they get the answer, and that is we have people who think that by receiving an inheritance, they have to pay tax on whatever they inherited. There are certainly certain types of assets that you can inherit that come with a tax liability, but the inheritance in and of itself is not income to you. If you inherit a savings account or a checking account or a house or a car, something like those, the value of that is not necessarily income to you for income tax purposes.
You just receive the asset. If you inherit other types of assets like a retirement plan, an IRA, a k , that does come with a tax liability, but only when you take the dollars out, not right up front. Actually, the big misconception for some people is they don't have to pay a tax liability the day they get an inheritance, so that's actually good news for them. But with the question of tax. There's no income-tax liability to the heirs, at least not immediately, but there can be taxes involved -- the estate tax, the inheritance tax -- sometimes those get lumped together under the moniker "death tax.
Tim Steffen : Completely true, yeah. Whether you want to call it an estate tax, an inheritance tax, a death tax, at the end of the day, it's all going to reduce what goes to the beneficiary. Now, the good news is that, at least at the federal level, the inheritance tax is something that Now, that may change, because there's a lot of possibilities out there. We know something is likely to happen at some point in the future, and might even happen sooner than that,, but the estate tax is not a thing that affects a lot of people. Tim Steffen: Now, there are certain states that have estate taxes that reach down to much lower levels of net worth.
There are other states that have what they call an inheritance tax that, depending on your relationship to the person who died, you may end up having to pay a tax on what you received, but those are relatively infrequent and uncommon. Most people don't have to worry about those. David Muhlbaum: Because we are unafraid to scare people a little bit ourselves, I'm going to put in a link to our list of States with Scary Estate Taxes , which is something we try to trot out at Halloween.
People can click on the link and actually see which states tax what, or what their estate tax levels are. Moving back to a question about the idea of what you might want to get and what you might not want to get as an heir, or how that might create a burden or not for you, obviously liquid assets have an advantage. David Muhlbaum: One of the things that we've also talked about here is the question of stuff, things, collectibles. One of the things I'd forgotten about, frankly, was that collectibles enjoy the same step-up in basis that say a stock or another market asset Can you talk a little bit about what that phenomenon is and what that break is, and how it actually benefits, again, the heir?
Tim Steffen: Well, to your earlier point about what's the best kind of inheritance, just like in the business world, cash is king. Beneficiaries want to inherit that cash if they can, but that's not always what people have to leave behind, or they leave specific bequests behind, physical assets or that. One of the provisions of the estate tax, and really more so the income tax law, is that when you inherit something, you get a basis adjustment. Your basis in that asset going forward is equal to whatever it was worth on the date that person died. That's not something, coincidentally, that happens if they gift it to you during their lifetime. If you receive a gift from an individual, you get what's called carryover basis.
The reward for somebody who keeps it in their estate up until the point they die is that, yeah, you might get hit with an estate tax, but the upside is you get a basis adjustment on that. Any gains that are built into that asset at the time you inherit it kind of go away. Can I jump in here? All of those gains in between don't get taxed. If you turn around and sell Apple, basically you get that money tax-free. It's a really nice benefit. I know the Biden administration has looked at eliminating it for rich people, because it does provide years and years and years of tax-free gains that heirs basically just get. Isn't that right, Tim? Tim Steffen: That's absolutely right. The other piece of that that people sometimes forget is that when you inherit it, it doesn't matter how much longer you hold it after that.
Any subsequent gain is always taxed as a long-term gain. Tim Steffen: Anything you inherit is automatically considered long-term. The owner might buy it today, die tomorrow, you inherit it and sell the next day. Any gain is a long-term gain at that point. Let's apply that principle. Let's just check in on how that might work for the physical, the tangible, the collectible that I had in mind. David Muhlbaum: I mean, one of the complications there would be valuing that asset, right? Tim Steffen: That's a great point.
You know, you inherit a house. You get a property tax bill every year that has a valuation of some kind on it, some sort of a value which may not totally reflect market value, especially in these crazy times with home values going up every day. At least you've got something, but that vintage record collection you've got in your basement or the baseball cards that are on your shelf or the bottles of wine in your cellar, there's not always a readily ascertainable market value for those things, so it can be a little tricky.
The point is still true that those assets do get a step-up in basis, just like your financial assets do. Yes, if you've got that, if you've got that vintage baseball card that's worth a million bucks, like one just sold for recently, that gain can go away. Sandy Block: I think the point Tim made about houses is really important, because if you inherit your parents' house, and given the way that home prices have just skyrocketed around the country, that's also a huge benefit to you as well. Because again, as I understand it, the value of that house is stepped up to the value on the day that the parent died. That could be a huge tax break for you, in that you will not have to pay taxes on all those gains. Tim Steffen: That's exactly right, Sandy.
For that beneficiary, that gain goes away. Because remember, the home sale exclusion you get for your personal residence won't apply. That half million dollars you can exclude when you sell your own home doesn't apply to the one you inherit. It's not your personal residence, but the good news is there's probably not much of a gain on it anyway, because it all went away via the step-up when you inherited it. That's an important one between spouses. I know we're talking about next-generation beneficiaries, but even with two spouses, when one spouse dies, that home gets a step-up in value for the surviving spouse, at least the half that was owned by the decedent. That's a great benefit for homeowners. David Muhlbaum: Getting in deep here, but a spousal heir who might already have the protection of the David Muhlbaum: Yeah, might already have the protection of the gain exclusion, but that might not cover how much the house is appreciated in value, they stand to benefit as well.
Tim Steffen: Correct, because that basis step-up chews up at least half of the gain. I guess the question is, as a non-spouse heir of a traditional IRA, what has changed that could increase the taxes that I'm going to owe on that money? Tim Steffen: This is a big one that a lot of people missed, because the law change happened right at the end of Everybody was focused on it in January, and then in February we all learned this term, COVID, and that kind of blocked everything else out of the news sites. We forgot about this law change, but it's a big one. It used to be that when you inherited a retirement account from somebody, you were allowed to take distributions out of the account over the rest of your life. If you're a or year-old beneficiary of your parents' retirement account, you had the rest of your life expectancy to take small pieces out of that account.
Well, this thing called the Secure Act changed all of that. For most beneficiaries of retirement accounts, when you inherit that now, you have what's called a year rule that you have to follow, meaning you have a year period during which you have to liquidate that account. It actually works out to about 11 calendar years. You get the year that the owner died, plus the next 10 years after that. You have really an year tax period during which you can take withdrawals out of that account. You can do it at whatever rate you want. There was some confusion about that earlier this year. There was some accidental guidance provided by the IRS that made us think maybe that rule wasn't quite the way it was, but that all got straightened out.
We're back to the rule being what we thought it was, and that is, at any point over that year period, you can take whatever you want out of the account. As long as by December 31st of that 10th year, that account is empty, you're fine. Sandy Block: Follow-up questions to that, Tim, because you mentioned somebody in their forties and fifties. They could be in their peak earnings years when they have to take this money out.
Since you have that flexibility to take it out any time during those 10 years, what should you be thinking about in terms of taking withdrawals so you don't get hit with a huge tax bill? Tim Steffen: I think we'll break it into two types of accounts. Let's take the easy one first. Let's say you inherit a Roth account. Tim Steffen: It's a totally tax-free account. Even when you inherit it, when the dollars come out, it's still going to be completely tax-free. You have the entire year period during which you could take that withdrawal. You don't have to take it out any sooner, and why would you? Let it grow tax-free as long as you can. The more complicated one is the traditional IRA, the k , the b , all those other taxable retirement accounts. There, you're going to be very tax sensitive, obviously.
The easy thing is you say, "Well, I'm just going to wait until the end, not pay any taxes on it until the very last year, and then I'll take it all out. The opposite of that would be maybe we do some more even withdrawals. Every year we take an equal amount out, to try and spread that tax liability out over the or year period. That makes a lot of sense for a lot of people. You take that one step further. You can be even more tax strategic. You look at your own income level. Am I in a high-income year this year or a low-income year?
I might fluctuate my distributions on an annual basis to match the rest of my income for that year. Hard to do for some who's just a W-2 employee, but if you're a business owner whose income maybe fluctuates a lot from year to year, you might have more flexibility in timing those distributions to match up with what makes sense from a tax standpoint. Sandy Block: Tim, I want to clarify one thing. What we were just talking about is adult children, non-spouses. There are different rules for if you're a spouse who inherits an IRA, correct? Tim Steffen: Correct, yes. This year rule that we're talking about applies to There's this group of people who are not subject to this year rule, and it's about five or six different groups of people.
Spouses are one of those. Spouses can continue to take distributions just however they would have in the past. Typically, they roll the account into their own name. Husband dies, wife inherits the IRA. She rolls the IRA into her name, takes distributions over her life expectancy, just like she always would have. There are other exceptions for minor children, those who are disabled or chronic health issues, or those who are within a certain age, 10 years or closer to the age of the decedent. They are not subject to this year rule, but it's a relatively small subset. Your traditional "mom and dad leave the retirement account to their adult children," they are the ones dealing with the year rule.
We've really gone through the details of how you would deal with an inherited IRA if you're the recipient. I wonder if we can step back for a second and, knowing how we have this significant variation between the Roth and the traditional, as well as how it's treated for spouses and, well, the others, can we take a moment to talk about what someone who's structuring their estate could do to make it easier on the recipient when it comes to IRAs? It depends on how far you want to go as an owner of these accounts. As the person who's going to be leaving the inheritance, how far do you want to go?
Because what these new rules mean is basically that your beneficiaries are going to have to pay tax on those accounts sooner than they otherwise would have, no later than 10 years, where it used to be their entire lifetime. They're going to pay tax sooner. They're probably going to pay more tax, because the distributions are going to be larger. They can't take small amounts for the rest of their lifetime, they've got to take larger amounts. The impact is your beneficiaries are going to pay more tax, which means they walk away with less money overall. What do you as an owner want to do about that? Some owners might say, "You know what? Tax laws are what they are. I'm leaving you this inheritance. You figure out the tax implications of that.
I'm not going to bend over backwards to make a bunch of changes to my estate plan to accommodate tax laws that might change again in the future anyways. They're still getting a nice inheritance. If they pay a little extra tax, they'll worry about that. Tim Steffen: A lot of things people have been trying to do. You hear people talking about maybe you do a Roth conversion, convert all those dollars out of the traditional IRA into a Roth. Mom and Dad pay all the tax on the account so that when the kids inherit it, they just get a tax-free asset.
That can really pay off, especially when Mom and Dad are at a very low income tax bracket and the kids who inherit it are at a very high bracket. There's a real opportunity there. When the brackets are more equal, the Roth conversion may not be the best strategy, because you're really accelerating a tax liability then. Other things people have talked about is maybe leaving the IRA to a charitable remainder trust, because that can allow for tax-deferred growth within the account and structure the distributions to the beneficiary a little differently.
That can work as well, but you do give up a lot of control. The beneficiary doesn't get the IRA like they used to, they just get a piece of it. There is no silver bullet for solving this new issue beneficiaries have. There's things you can do to maybe lessen the impact, but you're not going to be able to just solve it and go back to the old ways. One other thing I've heard people consider is leaving more in the IRAs to the spouse and leaving the taxable accounts to the kids, since the spouse still has a lot more flexibility in what they can do with the IRA.
Tim Steffen: For sure, yeah. The surviving spouse always has the most flexibility. They can inherit the account and roll it into their name and treat it as if it had always been theirs. Yes, when you're married, you've got more flexibility. It's the surviving spouse, that single person. That's where the tax issues come into play. Sandy Block: Right, and that's where things get complicated.
My experience writing this story is that inheriting as a spouse is a lot less complicated than inheriting as a child, because as an adult child, in addition to this issue, you have to sell the house. You usually have to get rid of everything. It's just a lot harder after the second spouse dies to manage the estate. Tim Steffen: The one solution I've found that I think works well for a lot of people in that case, if you really want to try and replace those taxes that are being lost under these new rules, life insurance.
In some respects it's better, because it's tax-free. Now, not everybody can get life insurance, but that's a solution I think can work in a lot of those cases and mitigate this extra tax cost. David Muhlbaum: Can you explain a little bit more of the tax parameters of life insurance there? Tim Steffen: A death benefit Mom or dad purchases a life insurance policy. One of them passes away, the beneficiaries are the kids. The kids inherit those dollars income tax-free. That's not considered income to the recipient. It goes back to the question we talked about at the very beginning, where that's an inheritance but it's not taxable income to you. It's just a tax-free inheritance. Frankly, it's a great way to provide liquidity to an estate when there's not a lot of liquid assets.
Think about the business owner who only has one asset. It's a business, and you can't sell off a piece of the business to pay an estate tax liability. You purchase life insurance. That provides the liquidity that's needed to pay the taxes, and allows you to keep those physical assets intact. David Muhlbaum: That reminds me of something I wanted to ask, which is about liabilities. It's pretty hard to inherit debt, right, but there are, I presume, some exceptions. Tim Steffen: Debt is typically an obligation of the estate. When an individual passes away, that's one of the roles of the executor of an estate, is to make sure any liabilities are taken care of. Before the beneficiary even gets their first payment, they want to make sure the mortgage is paid off, the credit cards are paid off.
Are there any invoices outstanding for work that was done at your house? All those things have to be paid off before the beneficiaries actually get their assets. No, you're not typically passing debt onto the next generation. Now, from spouse to spouse, yes.If that someone named oh brave new world quote in the will, they also get, oh brave new world quote, curiosity, sometimes maybe even envy. Well, oh brave new world quote brings good luck, apparently, if those words or something like that are the very oh brave new world quote thing oh brave new world quote macbeth guilt essay on the first day of the month. London: Robinson. United States Air Force Academy.