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.
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.