The wealthy minimize taxes with the “Buy, Borrow, Die” strategy:
1) Buy assets & hold (to avoid capital gains tax)
2) Use assets as collateral to borrow money (while assets appreciate)
3) Interest on borrowed money is a tax deduction
4) Pass on assets tax-free
Let's discuss:
1) Buy assets & hold (to avoid capital gains tax)
2) Use assets as collateral to borrow money (while assets appreciate)
3) Interest on borrowed money is a tax deduction
4) Pass on assets tax-free
Let's discuss:
1/ The “Buy, Borrow, Bie” strategy is an estate planning "hack" the wealthy use to minimize taxes they owe
The idea is to purchase investments that appreciate in value, borrow against those assets (using them as collateral for loans), then pass on those assets to heirs tax-free
The idea is to purchase investments that appreciate in value, borrow against those assets (using them as collateral for loans), then pass on those assets to heirs tax-free
2/ These loans are offered by banks & brokerage firms and allow borrowers to use their investments as collateral to borrow money
The interest rates on these loans are lower than traditional mortgages & home equity lines of credit, and there are often no monthly payments required
The interest rates on these loans are lower than traditional mortgages & home equity lines of credit, and there are often no monthly payments required
3/ As long as the value of their investments continues to appreciate, they can continue to borrow more money without having to sell any assets
This strategy can lead to significant tax savings because investors don't have to pay capital gains taxes until they sell their assets
This strategy can lead to significant tax savings because investors don't have to pay capital gains taxes until they sell their assets
4/ Interest paid on loans is a tax deduction:
The interest paid on loans secured by assets is often tax-deductible, providing an additional tax benefit for the borrower
This deduction can help offset other taxable income, further reducing the individual's overall tax liability
The interest paid on loans secured by assets is often tax-deductible, providing an additional tax benefit for the borrower
This deduction can help offset other taxable income, further reducing the individual's overall tax liability
5/ Die and pass on assets tax-free:
When the individual dies, their heirs can inherit the assets on a "stepped-up basis"
This means that the cost basis of the assets is adjusted to their market value at the time of the original owner's death
When the individual dies, their heirs can inherit the assets on a "stepped-up basis"
This means that the cost basis of the assets is adjusted to their market value at the time of the original owner's death
6/ If heirs sell any of the assets, they only pay capital gains tax on the appreciation that occurred after the original owner's death, avoiding tax on gains that accumulated during the deceased's lifetime
If the estate is below the estate tax threshold, no estate taxes are due
If the estate is below the estate tax threshold, no estate taxes are due
7/ The "Buy, Borrow, Die" strategy allows the wealthy to:
• Borrow against their assets without selling them
• Let their assets appreciate in value while funding their lifestyle
• Minimize their tax bill
• Pass on their wealth with minimal tax
• Borrow against their assets without selling them
• Let their assets appreciate in value while funding their lifestyle
• Minimize their tax bill
• Pass on their wealth with minimal tax
8/ The "Buy, Borrow, Die" strategy can be a very effective way for wealthy individuals to minimize paying taxes on their wealth
* This strategy assumes that the loans will be paid back in full
* Failing to pay the loans back would make the loan taxable
* This strategy assumes that the loans will be paid back in full
* Failing to pay the loans back would make the loan taxable
9/ There are some risks associated with this strategy:
• If the value of your assets declines, you could end up owing more money on your loans than the assets are worth
• If you die before you've paid off your loans, your heirs will be responsible for them
• If the value of your assets declines, you could end up owing more money on your loans than the assets are worth
• If you die before you've paid off your loans, your heirs will be responsible for them
The wealthy use tax law to their advantage and you should too. These threads take time to write, so if you found it helpful:
• RT the FIRST tweet to share🔁
• Follow me @FluentInFinance for more
• Sign-up for my newsletter to learn more about money: TheMoneyNewsletter.com!
• RT the FIRST tweet to share🔁
• Follow me @FluentInFinance for more
• Sign-up for my newsletter to learn more about money: TheMoneyNewsletter.com!
Loading suggestions...