That one doesn’t make sense. They’re paying interest on the money they borrow, and they still pay the taxes when they sell the stock, which they inevitably must, in order to pay off the debt. It’s just been time shifted, they didn’t save that money. If the stock is appreciating, they end up paying higher tax on it.
I’m sure there are better loopholes than this that are too complicated to show in an infographic.
They pay very low interest on the loans, and they only pay taxes on the stock if they sell (and realize the gains). If they die, their heirs don’t pay taxes because of the step up basis rule.
But they still have to pay the bank back, so it just pushes the question to where they get the income or assets to do that. It would be weird to pay interest on the debt for decades until they die and their heirs can pay it.
What’s the mechanism for getting one of these very low interest rate loans? Isn’t that unprofitable for the bank? Or is this option unavailable when interest rates are high? 5 years ago I got a fixed mortgage at 2.5% but I couldn’t do that today, does that change if I’m rich enough?
I’m not rich enough to know the details. You can probably find answers online since it’s not like a secret. I think if the amounts are large enough, the rates can be lower so the bank still makes money. Also the collateral is worth more than a house, I think. Usually. More liquid.
The interest is very low, since it’s guaranteed by assets. The cost of the interest is less than taxes. So, as soon as one loan expires you take out another. You keep taking them out until you die, then your estate pays the loans back out of the estate and then the rest passes on to your offspring. If you want to know more, there isn’t more to know really but you can Google it. This buy-borrow-die scheme wasn’t made public until the last few years and details are still scant.
That one doesn’t make sense. They’re paying interest on the money they borrow, and they still pay the taxes when they sell the stock, which they inevitably must, in order to pay off the debt. It’s just been time shifted, they didn’t save that money. If the stock is appreciating, they end up paying higher tax on it.
I’m sure there are better loopholes than this that are too complicated to show in an infographic.
They pay very low interest on the loans, and they only pay taxes on the stock if they sell (and realize the gains). If they die, their heirs don’t pay taxes because of the step up basis rule.
But they still have to pay the bank back, so it just pushes the question to where they get the income or assets to do that. It would be weird to pay interest on the debt for decades until they die and their heirs can pay it.
I’m sure it gets more complicated than that. “Buy borrow die” is a common strategy
What’s the mechanism for getting one of these very low interest rate loans? Isn’t that unprofitable for the bank? Or is this option unavailable when interest rates are high? 5 years ago I got a fixed mortgage at 2.5% but I couldn’t do that today, does that change if I’m rich enough?
I’m not rich enough to know the details. You can probably find answers online since it’s not like a secret. I think if the amounts are large enough, the rates can be lower so the bank still makes money. Also the collateral is worth more than a house, I think. Usually. More liquid.
The interest is very low, since it’s guaranteed by assets. The cost of the interest is less than taxes. So, as soon as one loan expires you take out another. You keep taking them out until you die, then your estate pays the loans back out of the estate and then the rest passes on to your offspring. If you want to know more, there isn’t more to know really but you can Google it. This buy-borrow-die scheme wasn’t made public until the last few years and details are still scant.