Borrowing money against their stuff to get more stuff to borrow money...

Comments

• whotookkarl@lemmy.dbzer0.com ⁨26⁩ ⁨minutes⁩ ago

  Inheritance is wealth centralizing and anti democratic without severe restrictions

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• akilou@sh.itjust.works ⁨51⁩ ⁨minutes⁩ ago

  This doesn’t make any sense. How are the loans getting paid back?

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  • CaptSneeze@lemmy.world ⁨9⁩ ⁨minutes⁩ ago

    This is the process, extremely simplified:

    1. It’s 1970. You inherit $10M from your rich dad who worked hard.
    2. Buy $10M index fund stock.
    3. Borrow $10M against stock.
    4. Live tax free off that $10M loan for 30 years ( you can do that because you started in 1970 when it was cheap to buy a house).
    5. Your stock is now worth $58M (avg 6% per year for 30 years)
    6. Your kids inherit the stock at its current value and immediately sell $10M worth to pay off original loan. They pay no capital gains tax because the stock barely moved in the time between when they took ownership and selling it. All of the value growth since original purchase in 1970 is now tax free. The kids now start with $48M.
    7. Repeat

    Obviously, there is more to it than this. For example, this does not account for interest in the loan, or diversification of investments, or ability to hire accountants to maximize on the process.

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  • BeardededSquidward@lemmy.blahaj.zone ⁨34⁩ ⁨minutes⁩ ago

    They get a painting worth 10K, get a loan for that, then get it appraised for 30K, get a loan on that from somewhere else and pay off the other one. That’s one idea.

    The second is they like assets that provide passive income and appreciate. You’ll find a lot get into land as well and rental units.

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• Arghblarg@lemmy.ca ⁨2⁩ ⁨hours⁩ ago

  Yup, search for “Buy borrow die” and there are various articles about the technique.

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• givesomefucks@lemmy.world ⁨2⁩ ⁨hours⁩ ago

  There actually is an estate tax after death:

  www.irs.gov/businesses/…/estate-tax

  Right now it only kicks in after 15 million. A decade ago it was still 5 million. But it doubles to 30 million for a couple.

  For the really wealthy people, they need to pay to obfuscate the rest of the money thru trusts and offshore banking, which they’d rather not to pay to do.

  Which is why they’re still pushing to raise the cap every year.

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  • chonglibloodsport@lemmy.world ⁨10⁩ ⁨minutes⁩ ago

    They donate it all to charities…. Charities they set up with their relatives on the boards of trustees, who then get paid salaries from the charity’s endowment.

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• deHaga@feddit.uk ⁨1⁩ ⁨hour⁩ ago

  If all the assets are secured by loans, then they inherit fuck all. They don’t magically not owe loans or pay interest.

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  • evasive_chimpanzee@lemmy.world ⁨37⁩ ⁨minutes⁩ ago

    I’m not even close to the type of person where this strategy is an option, but the magic is in the stepped-up basis from what I understand.

    Let’s say an asset is purchased for $1 million, held until it’s worth $10 million, and used to secure a $5 million loan. If you sell the asset, you owe taxes on the $9 million capital gain. If you die, the asset’s value “steps up” to the new baseline of $10 million. Your heir could then sell it with no capital gains tax, and pay off the loan and pocket the rest. If they hold onto the asset, and it appreciates to $11 million, they would only owe taxes on the gain of $1 million, not $10 million.

    The whole scheme makes sense when it’s applied to a random farmer inheriting land from his parents: you dont want to force him to sell the land to pay capital gains. It makes a lot less sense when it’s someone inheriting stocks worth the GDP of a country.

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  • satanmat@lemmy.world ⁨49⁩ ⁨minutes⁩ ago

    It’s complicated…

    The estate pays the loans back, but as the assets appreciate, the loans are covered….

    The trick is moving your assets around, so that you personally own very little, and they have trusts or LLCs that own the assets so there isn’t inherent tax liability

    Shrug fuck us.

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    • deHaga@feddit.uk ⁨33⁩ ⁨minutes⁩ ago

      Yachts don’t appreciate but yes, and inflation eats the debt so they win both ways.

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  • davad@lemmy.world ⁨53⁩ ⁨minutes⁩ ago

    For the ultra wealthy, the value of their assets goes up faster than the interest rate of the loan.

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    • deHaga@feddit.uk ⁨31⁩ ⁨minutes⁩ ago

      Yep, you need a proper market crash for the loans to be called in. That’s when it gets fun.

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• Sanctus@anarchist.nexus ⁨2⁩ ⁨hours⁩ ago

  “The rich pay nintey-"
  “They can pay fucken 100 percent, I dont give a shit. You want to be a world pillar? Here you go.”

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