'Buy Borrow Die' - How the MEGA RICH Pay No Taxes

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Buy, Borrow, Die: How Rich Americans Live Off Their Paper Wealth
Banks say the wealthy are borrowing more than ever, using low-interest loans backed by their investments

Rising stocks and rock-bottom interest rates have delivered a big perk to rich Americans: cheap loans that they can use to fund their lifestyles while minimizing their tax bills.

Banks say their wealthy clients are borrowing more than ever before, often using loans backed by their portfolios of stocks and bonds. Morgan Stanley wealth-management clients have $68.1 billion worth of securities-based and other nonmortgage loans outstanding, more than double five years earlier. Bank of America Corp. said it has $62.4 billion in securities-based loans, dwarfing its book of home-equity lines of credit.

The loans have special benefits beyond the flexible repayment terms and low interest rates on offer. They allow borrowers who need cash to avoid selling in a hot market. Startup founders can monetize their stakes without losing control of their companies. The very rich often use these loans as part of a “buy, borrow, die” strategy to avoid capital-gains taxes.

Many wealthy people are also borrowing against their portfolios. When Tom Anderson started at Merrill Lynch & Co. in Cedar Rapids, Iowa, in 2002, many of his fellow advisers had just one or two securities-based loans in their book of business. Over the years, he encouraged more clients to borrow and noticed peers doing the same. Now it is common for advisers at big firms to have dozens of these loans outstanding, he said. Merrill Lynch is now a part of Bank of America.

“You could buy a boat, you could go to Disney World, you could buy a company,” said Mr. Anderson, who now consults with banks on how to manage the risks associated with these loans. “The tax benefits are stunning.”

Andrei Jikh
How to Invest Like The 1%

Marko - WhiteBoard Finance
Buy. Borrow. Die. How The Rich Stay Rich

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DISCLAIMER:
This video is for entertainment purposes only. I am not a legal or financial expert or have any authority to give legal or financial advice. While all the information in this video is believed to be accurate at the time of its recording, realize this channel and its author makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in this video.

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[Alvin_]

"You're no longer in the 9 figure club; you're basically poor!" - Jake Broe 😂😂😂😂😂

[brandencoluccio]

The rich don’t borrow like everyone else. They don’t go to Fidelity. Their net worth gets them access to something called private wealth banking where they can borrow money for less than 2.5%. In some cases under 1% depending on asset allocation. They also have access to investments that the normal rich don’t have access to, meaning they can earn far more than 8% consistently.

[Matt-bgwg]

By far the best video explaining this concept I’ve watched on YouTube

[drummer]

Thanks Jake; that was enlightening to this retired senior citizen; gonna share this video with my children and grandchildren.

[kmque]

Hi Jake I enjoy ur videos on the rich tax avoidances, they are sad but interesting.

[SandStormXII]

very informative video, especially in a time like this

[tycoontotsfinance]

Amazing content! This was really, really, good.

[ModernMoneyHabits]

Still the best video I've seen explaining this concept. Thanks @JakeBroe

[tinaa.]

Super helpful and straightforward. Thanks!

[abdinasirmohamud]

Always learning from these videos, thank you

[almeloub]

Absolutely brilliant Jake ..Well Done ! I came across this video one year late....but nevertheless:

This is the the same concept (on much smaller scale though 🤪) I've been applying on the Standard Bank "Access bond" principle in South Africa.

I also fully understand (and apply) the tax deductible on offer on the interest being generated as a result of the borrowing (= self financing).

I've never bought a vehicle and investment houses any other way.

[arene]

Another super interesting and informative vid, dude 🙏

[ljuan]

Glad you used the $100, 000, 000 example, so I could relate 😁. Nah I totally understood and thank you!

[jeffconner]

The awareness presented here is awesome. So they child inheriting pays off the loan from the stepped-up basis to avoid the capital gains tax? And otherwise, you still have to pay tax on the income used to pay the loan back. Do I have that right? I would like to see the long-hand math on this one that includes paying it back. It seems without the step-up basis that there's no benefit to this.

[djsyntrix]

The stuff they don't teach in school lol Great video mate!

[drdream]

I always wondered who pays back the loan.. this answered that . But most large companies are c corporations which pay 21% tax on all income and wasnt included here

[matthewsherwin]

Well my late father paid taxes when he had to and I pay my taxes too but I can certainly see where you’re coming from! Hope you’re doing well and having a great, happy day my friend! Stay happy, Jake! 👍👍👍

[ronripley]

Very well done video, Jake! I was pretty familiar with SBLOCs (I have one) and the buy/borrow/die strategy....but still found this helpful! Bravo.

[jacklnu]

FYI, if the corporation does not pay a salary to its shareholder and just pays a dividend, it is not entitled to claim a tax deduction on its corporate income tax return. The 37% rate is the highest marginal rate and is not the actual effective when combined with the lower brackets. The highest corporate tax rate has been reduced to 21% in recent years.

[zunedog]

Great stuff. Follow up with something about big companies not paying taxes?