“Buy Borrow Die” – How the MEGA RICH Pay No Taxes
Video Summary
The ultra wealthy have a way to avoid paying taxes, and it’s called the “buy, borrow, die” cycle. The first step is to buy assets, such as real estate or stocks. The second step is to borrow against those assets using tools like margin or private banks, which offer low interest rates. This way, they can fund their lavish lifestyle without having to pay taxes. For instance, if someone wants to get $10 million to fund their lifestyle, they can borrow against their existing assets instead of selling them, which would result in 20% being taken by the government.
The third step is to die, and this is where the step-up basis comes into play. When inherited, the beneficiary gets the assets stepped up to their current value, and the estate tax exemption is applied. This means that they can sell the assets and pay no taxes. The ultra wealthy use trusts and gifting to get around the estate tax, making it easy to pass their wealth to the next generation. This cycle of buy, borrow, and die allows them to avoid paying taxes forever, as they can keep the debt going and never have to pay it off.
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