"Buy Borrow Die" - How the MEGA RICH Pay No Taxes
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www.wsj.com/articles/buy-borr...
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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#BuyBorrowDie #EstatePlanning #PayNoTaxes
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@JakeBroe 2 жыл бұрын
Thanks for watching everyone! If you found this video interesting then consider giving it a LIKE to support my channel. If you want to learn more about Step-Up in Basis, then check out that video here: kzfaq.info/get/bejne/arxzrc2JsdHGg4k.html
@wensonchang6077 2 жыл бұрын
i think the buy borrow die only works for SBLOC's. If you take a loan there will be an amortization schedule which means you're gonna need to pay it back through cash or asset liquidation. The loans are typically short term too.
@Alvin_1914 2 жыл бұрын
"You're no longer in the 9 figure club; you're basically poor!" - Jake Broe 😂😂😂😂😂
@JakeBroe 2 жыл бұрын
It's got to be embarrassing for those in the 9 figure club to fall out of it. They probably have to hide it from their friends in shame.
@brandencoluccio2623 2 жыл бұрын
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.
@JakeBroe 2 жыл бұрын
Yep! This is true. Didn't have screenshots to show people of this, so I just went with Fidelity, lol.
@Chris.Brisson 2 жыл бұрын
Perhaps this is why Wall Street throws such a tantrum every time there is the slightest suggestion that rates may one day be raised.
@lolwtnick4362 2 жыл бұрын
foundation funding, also borrow against yourself. it's not that hard
@brianjames9832 2 жыл бұрын
I work for a Private Bank and can confirm that we offer miniscule spreads on our asset backed lines of credit. Also, most of the rich folks I work with buy into private equity, which offers better returns than the market on average.
@22phan 2 жыл бұрын
under 2% interest rate is typical. when buying super large shares there a 50% discount off market price with an option to buy a locked price of x number in the future. then tax loss harvesting and itemized deduction cancel out. Normal people have easy access to this wealth rate at M1, Robinhood, Betterment.
@Matt-bg5wg 5 ай бұрын
By far the best video explaining this concept I’ve watched on KZfaq
@1drummer172 2 жыл бұрын
Thanks Jake; that was enlightening to this retired senior citizen; gonna share this video with my children and grandchildren.
@JakeBroe 2 жыл бұрын
Haha, thanks for watching and sharing my content 1Drumer! Cheers!
@abdinasirmohamud2068 2 жыл бұрын
Always learning from these videos, thank you
@JakeBroe 2 жыл бұрын
Thanks for watching Abdinasir! Cheers!
@ModernMoneyHabits Жыл бұрын
Still the best video I've seen explaining this concept. Thanks @JakeBroe
@tinaa.4854 2 жыл бұрын
Super helpful and straightforward. Thanks!
@JakeBroe 2 жыл бұрын
Thanks Tina! Cheers!
@tycoontotsfinance6729 2 жыл бұрын
Amazing content! This was really, really, good.
@kmque3166 2 жыл бұрын
Hi Jake I enjoy ur videos on the rich tax avoidances, they are sad but interesting.
@SandStormXII 2 жыл бұрын
very informative video, especially in a time like this
@arene1710 2 жыл бұрын
Another super interesting and informative vid, dude 🙏
@JakeBroe 2 жыл бұрын
Thanks for watching Aren! I appreciate it!
@almeloub Жыл бұрын
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.
@almeloub Жыл бұрын
Also: I agree: Never sell
@wolfgangi 2 жыл бұрын
One day I will be using this strategy, thanks Jake haha
@JakeBroe 2 жыл бұрын
Haha, you and me both! I can't wait to hit that first Million.
@zunedog31 2 жыл бұрын
Great stuff. Follow up with something about big companies not paying taxes?
@JakeBroe 2 жыл бұрын
Thanks zunedog! I can look in to that as a video idea. Cheers!
@chanskichanski7874 Жыл бұрын
Big companies pay big money to the government but it’s not called taxes. It’s a word game played by the politicians.
@djsyntrix 2 жыл бұрын
The stuff they don't teach in school lol Great video mate!
@JakeBroe 2 жыл бұрын
Nope, they definitely do not. Cheers Shane!
@ljuan5000 2 жыл бұрын
Glad you used the $100,000,000 example, so I could relate 😁. Nah I totally understood and thank you!
@JakeBroe 2 жыл бұрын
Gotta have high goals LeJuan! Haha, the first $10 million will be the hardest to get
@Bacciagalupe 2 жыл бұрын
Great break down
@JakeBroe 2 жыл бұрын
Thanks for watching Brian! Cheers!
@king1lobo 2 жыл бұрын
Great video!
@JakeBroe 2 жыл бұрын
Thanks for watching Corin!
@ccstarz19 2 жыл бұрын
Great video. thanks,
@JakeBroe 2 жыл бұрын
You are very welcome Chris! Cheers!
@chartingwithliv 2 жыл бұрын
Its the infinite money glitch.
@JakeBroe 2 жыл бұрын
Rich people cheat codes for sure!
@carterfinance2376 2 жыл бұрын
Love the videos
@JakeBroe 2 жыл бұрын
Thanks Carter! Cheers!
@daveclark6324 2 жыл бұрын
This was cool info to hear about - of course I will never have these options of what to do with $100 million of assets. Although... maybe Jake can create a video detailing how I get to $100 million 😉
@JakeBroe 2 жыл бұрын
If you weren't born rich, then everyone has to start out making W-2 income. Find the highest paying job you can and save everything. Once you have enough, then start a business. Run it very well, and then sell that business to someone else for a huge personal profit. Then use that profit to buy assets (real estate and stocks). This pretty much is the blueprint to be self-made in America.
@ssc1083 2 жыл бұрын
@@JakeBroe that’s all good and all, but one can also skip/delay the business part and just buy real estate and stocks with the W-2 income and employer contributions. And then start a business on the side if possible, attempting to go full time with the business if things go well. Then invest more into real estate and stocks after selling the business (or running it really well).
@lolwtnick4362 2 жыл бұрын
@@ssc1083 sure if you're slow. stock and real estate is slow money and limited on asset size. you can start a business today and grow it and make unlimited money.
@jeffconner8231 2 жыл бұрын
@@JakeBroe I'd like to see a video on this. Self-Made in the US.
@wisdomok99 2 жыл бұрын
@@JakeBroe what do you think about creating KZfaq channel as a business for the future?
@elenakalliste 2 жыл бұрын
I liked the video even though I didn’t like the video. This was a real bummer just to see how easy this is for the rich to get richer and never pay taxes
@JakeBroe 2 жыл бұрын
Haha, thanks Elena! I appreciate that!
@chanskichanski7874 2 жыл бұрын
Why upset? You can do the same. I’m working that way too.
@cernabonati7022 2 жыл бұрын
You can literally do the same… if you truly desire it. Envy is poisonous to the spirit
@sawadwahid7125 Жыл бұрын
@@chanskichanski7874 but I know this strategy are used by millionaires and billionaires to lead a luxury lifestyle
@jeffconner8231 2 жыл бұрын
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.
@zk1476 2 жыл бұрын
Nice video Jake. Quick question, Let's say we are just regular investors with no where near the amount of money the super rich have. If we needed the money and instead of sell our assets and pay 20% taxes, why don't we just do the same and keep the asset and borrow from say Fidelity for 8% interest? Isn't that still better than paying 20% in taxes?
@JakeBroe 2 жыл бұрын
Yep, but it's all relative to how much you have vs how much you want to live on. If you have $400,000 in a brokerage account and want to borrow $80,000 on margin (20%) to buy a rental property that you can cash flow to eventually pay down your margin debt, yeah, people do this all the time. They never sell.
@anyanov 2 жыл бұрын
Helpful!
@matthewsherwin8741 2 жыл бұрын
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! 👍👍👍
@JakeBroe 2 жыл бұрын
Thanks Matthew! I hope you are doing well also. Cheers!
@JacksonWelch 2 жыл бұрын
Great video Jake. 100% an issue congress needs to fix but the question is how?
@JakeBroe 2 жыл бұрын
The step-up in basis needs to be eliminated. People who inherit assets need to also inherit the cost basis of those assets for tax purposes. This feels obvious, lol
@JacksonWelch 2 жыл бұрын
@@JakeBroe I meant like borrowing against assets on margin, should that be kept? That seems like the reason why the rich can stay wealthy.
@JakeBroe 2 жыл бұрын
@@JacksonWelch , no, I don't see a problem in people borrowing money to keep assets. As long as everyone is eventually paying taxes on their capital growth, then the system isn't rigged in their favor.
@camipco 2 жыл бұрын
Wealth tax. You annually tax held assets above a certain level (say $500k so you aren't taxing the vast majority of individual homeowners) at a relatively low rate - most countries that have it do under 1%. Of course, the thing the rich do about this is hide their assets, so there's a new set of problems to solve, but still.
@-._.-KRiS-._.- 2 жыл бұрын
Would requiring the loans to be paid back in a certain amount of time help? Say, 5-10 years otherwise they default on the loan?
@behrensf84 2 жыл бұрын
so could I use my margin interest payment to offset my ira to roth ira roll over?
@marlon82mc 11 ай бұрын
A high life insurance policy at the "Die" step can also pay off the loan.
@ritzcarlson 2 жыл бұрын
5:04...."you're basically poor"...hahaaaa!
@JakeBroe 2 жыл бұрын
Cheers Rob!
@ronripley2247 2 жыл бұрын
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.
@jacklnu1614 2 жыл бұрын
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.
@thomasveysey7363 2 жыл бұрын
I get this concept but one thing i’m struggling with is how the line of credit gets repaid. Surely if someone borrowed 10 million usd to fund their lifestyle they would eventually have to sell some assets to repay the loan? Or are we presuming that their assets are cash flowing enough to repay the payments? Would appreciate if someone could help out this curious 18 year old.
@ragtagropes 2 жыл бұрын
You basicly fold a years payments into the next loan you take out. The debt gets resolved tax free when you die, so as long as you hold assets greater than the loans you've taken out, the bank is happy to keep throwing money at you each year.
@edek3159 2 жыл бұрын
Two things come to mind that I can think of: Typical stocks has 1% dividends. 1%of 100m is 10% of 10mill. So 100mill of stocks at 1% dividends will get you enough money, even after paying tax on those, to pay off the interesnt. 2nd, it is still cheaper to sell some of your stock that gains in value, pay 20% tax and then pay off the interest.
@edek3159 2 жыл бұрын
Im sure the maths works. Ie 8% stock gain. Sell. Pay 20% tax. Pay off 4% interest. This is assuming your assets arent providing any other cashflow. Houses/hotels can use rent but thatll be disposable income.
@edek3159 2 жыл бұрын
Imagine I owned $10,000,000 in SNP500. Making 10% a year. With 1.5% dividend yield. I want to buy a $4,000,000 yacht. I take out a loan on 3% interest. That means I must pay back $120,000 a year on interest. My snp500 is giving me $150,000 of dividends a year, that 20% i pay tax means $120,000 left. Hence my loan is financiable (on interest only) which banks love. Worst case theres a crash. Your snp500 drops 50% to $5,000,000 (conservative!). You can still sell and pay off the 3 mill loan
@edek3159 2 жыл бұрын
Otherwise id have to sell $6,000,000 in snp500. Asset becomes 'realised' so i pay approx third tax. That means ive only got 4mill in SNP500 making me 10% returns, instead of 10mill. NOT GOOD
@georgeemil3618 2 жыл бұрын
In Canada, on death, assets are deemed sold. That means, eventhough the heirs will inherit the assets at market value (stepped-up) the estate of the deceased will have to pay the tax on capital gains. So the heirs and the estate will have to come up with both capital gains tax AND pay back all that debt ( unless they continue the never ending cycle of borrowing).
@drdream123 10 ай бұрын
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
@GOPA90 2 жыл бұрын
5:03 😂
@___MK__ 2 жыл бұрын
so you guys don't have to pay back capital? In europe when you borrow, you have to pay back a percentage of the capital each month along with the interest, this just won't work.
@stacywhite251 2 жыл бұрын
@BINH CHIEN Come on, This is 2021 People who aren’t even traders makes money from stocks, crypto and forex market, There is a lot of opportunities all over the world, you just gonna make the right picks
@bryan17716 2 жыл бұрын
There are pledged asset lines against your holdings that have significantly better rates - I would bet that is what they are doing versus margin.
@JakeBroe 2 жыл бұрын
Correct, but I kept it simple and just used margin as an example.
@MrKenGuzman 2 жыл бұрын
Buy where does the money come from to make the loan repayments?
@camipco 2 жыл бұрын
I learn a thing!
@JakeBroe 2 жыл бұрын
Awesome! Glad you found the video Jamie!
@Adam-bx7rn Жыл бұрын
So just to be clear, do you have to sell your assets every month to pay back the debt?
@MRobert1984 2 жыл бұрын
So how does someone pay back the money they borrowed in margin to pay for a car? Do you sell some of your holdings monthly? Would that cause capital gains taxes?
@Chris.Brisson 2 жыл бұрын
When you hold $100 million of the car company's stock, they will lease you a car for $0 per year.
@sidra_games4551 2 жыл бұрын
There is not 0 income. They generally have some salary, and Dividends on $100m of investments even at 1% is $1m a year. So there is enough to make loan payments.
@markclark8259 2 жыл бұрын
I tried this on a small scale. I bought a house with cash, $150,000. Over the next 8 years it increased to 250,000. Owned in full, no loans, no leans, free and clear, never had any mortgage. No bank would loan me a penny. Any ideas why?
@Putseller100 2 жыл бұрын
Real estate is weird like that, small buildings like a house is based on your income. Once it becomes a larger building that produces income than a loan can be borrowed according to its value and income it produces. It seems we can push a button and take out a large loan against stock positions without income being any consideration. What’s weird is if you ever read any of Robert Kiyosaki he will say the exact opposite. He says over and over a banker will not loan you money to buy stocks but he will bend over backwards to loan for real estate. I know it’s not an exact comparison but it is something to think about
@chanskichanski7874 Жыл бұрын
Did you mean you borrowed $150k from the stock position and buy the house free and clear?
@mig519 2 жыл бұрын
What money is used to pay back the loan? If it’s paid back by selling assets, aren’t those subject to capital gains tax? I understand the tax avoidance initially but what I don’t understand is where the money comes from to pay the bank back. Thanks
@JakeBroe 2 жыл бұрын
You don't ever have to pay it back. As long as the assets grow faster than the debt, the bank doesn't care. They have margin requirements, so the debt only matters as a percent of the account and it can be ignored forever as long as the assets grow faster than the interest accumulating on the debt. When a wealthy person dies, the person inheriting the account can sell assets (if they want), they won't pay taxes on capital gains now because of the step-up in basis, and they can clear the debt.
@mig519 2 жыл бұрын
@@JakeBroe thank you
@crestinglight 2 жыл бұрын
@@JakeBroe Thank you! This was the part I didn't understand. So, no payments are made on the loan until the owner of the debt dies and a transfer of assets happens. If a guy has 100 mil in assets, and borrows 10 mil, then dies years later owning 200 mil in assets, with 20 mil in debt, they pass on assets worth 200 mil tax-free to their kids, then the kids can sell those assets and pay back the 20 mil in debt. Or they can just roll it all the way to the next generation. That's diabolical.
@Putseller100 2 жыл бұрын
I was thinking of a mix of qualified dividends and some covered call income to pay back the loan. Dividends are taxed friendly and with the 25,000 standard deduction one could sell option premium to that level and not pay tax. Mix that in with growth and it looks like the loan may not have to be paid back? Another question can the loan renew or revolve like a credit card every year or does the loan have to be paid back to get a new loan. For ex 1 million portfolio and borrow 50k to live on for the year. Later on you still have a good balance left, can you take out another 50k with the original loan still open?
@camipco 2 жыл бұрын
@@crestinglight You're still making the interest payments on the loan, which is what the bank is getting out of this, you just don't ever pay down the principle.
@dogegamer3288 4 ай бұрын
But if you borrow of stocks and repay the margin loan back with profits from the stocks by selling them, isn't a taxable even triggered when you sell the stock to pay back the margin loan?
@sosukewifhat 2 жыл бұрын
Extremely well explained but there's one thing I don't get, If I have 100 million usd today and I decide to borrow 10 million usd at 4% a year to buy a car, at one point I'll have to pay those 10 millions back right ? Like if my car dies in 25 years from now, there would be no point to keep paying those 4%. And to do that I'll be forced to sell my assets, a bit confused !
@sosukewifhat 2 жыл бұрын
Nevermind ! Got it ! The opportunity cost outweighs the loan by a lot in the long run and the loan we have to pay back in 25 years or more from now will be a insignificant amount :D
@worldonastrng 2 жыл бұрын
The piece I don't understand is that loans have to be repaid. Where is the capital to repay coming from?
@JakeBroe 2 жыл бұрын
It does not have to repaid. There is no monthly payments required. Interest on the loan just accumulates. But if your assets grow faster than the interest on the debt, then percentage wise you owe less money (as a percentage) over your lifetime. Then when you die, you inheritors can keep the debt game going or pay it off tax free.
@HashCat84 Жыл бұрын
what happens to all those debt(borrowed money) when they die beside the asset?
@dwalker6868 2 жыл бұрын
Thank you the life LOL
@JakeBroe 2 жыл бұрын
Haha, thanks D!
@Bryan-od1fv 2 жыл бұрын
Can you borrow each year? Lets say you borrow 5% each year can you do that?
@lchaim1754 2 жыл бұрын
Hi Jake, might seem like a silly question but where do the rich get the cash to pay that monthly/yearly interest on the loan if their gains are unrealised?
@wilderhumans 2 жыл бұрын
THANK YOU! I dont understand this part of the formula. Also how do they pay that loan off after they die if they're passing on their assets to their heirs?
@lchaim1754 2 жыл бұрын
@@wilderhumans Hopefully we get a response because it's very confusing!!
@jamesmoffatt1238 2 жыл бұрын
They don't, or they take a "meager" salary to pay off the interest since margin interest is tax deductible. The collateral is increasing in value faster than the value of the loan so they just let the interest pile up. After they die their heirs can pay off the loan by selling assets at 0% tax since the value gets stepped up.
@lchaim1754 2 жыл бұрын
@@8bg201 Thank you so much for that, never knew! That's unreal!
@chrischester321 2 жыл бұрын
@@jamesmoffatt1238 holy shit, this is amazing! Why don't they teach us this in our economics class?
@jcmorgan26 Жыл бұрын
When it comes to paying off the debt at the end of your life, would it not be much better for you to have a life insurance policy (or multiple policies) allocated in your will to covering the debt you’re building over time? That way when you die, the debt is paid off by the life insurance policy automatically instead of the debt being passed on to the next generation. The cost of a term life insurance policy should only be a small part of the money you’re taking out to live on and can simply be considered a necessary payment like the interest. Doing this also makes sure the strategy doesn’t become unmanageable and therefore dangerous if the government gets rid of the step up basis laws as the cost is already covered so no asset selling, and the associated taxable events, are required.
@rino7789 2 жыл бұрын
For those of us who are not rich, what do you advise Captain?
@JakeBroe 2 жыл бұрын
Work a high paying W-2 job that will unfortunately cost you a lot in taxes... then save and invest all that income in to assets (real estate and stocks) which will then let you live tax free the rest of your life.
@gama1123 2 жыл бұрын
Well, the part that no one explains in this videos is how are they paying the interest? Let alone the principal... they eventually need to sell some portion of the assets to cover at the very least the interest righ?
@JakeBroe 2 жыл бұрын
No, there is no requirement to make payments on the interest accumulated or the principal balance of the loan. If the amount of debt against the account is growing each year at 4% and the equity in the account is growing at 10% a year, then the ratio of debt to equity in the account shrinks without any payments being required. The wealthy only pay off the debt when they die and they can sell all their assets tax free.
@gama1123 2 жыл бұрын
@@JakeBroe so what happens when they die? The bank who gave them the loan sells whatever assets they need in order to cover the debt? Is the debt forgiven because they died? Or is the debt passed on tho the heir along with all the assets? Thank you very much for the reply sir! I really appreciate it!
@Lets_DoWhatWeWant 2 жыл бұрын
Just subscribed! Ps .mil
@JakeBroe 2 жыл бұрын
Welcome to the channel Jo Geo! Great to have you with us!
@treygarver7791 5 ай бұрын
The Buy Borrow Die strategy probably was more popular when interest rates were much lower. The debt has to be serviced.
@bhh8005 5 ай бұрын
Sorry for a late answer, but it is not that simple. On a ordinary loan the bank calculate the interest for the length of the loan and most of the interest is paid in the first years. But the rich are using Stinking rich reverse mortgages. The interest is calculated annually and added to the debt in the end of the year. They got the tax deduction for the interest each year but nothing neads to be paid before they sell the asset or dies. They don't nead to service the debt at all.
@asscass2 2 жыл бұрын
But when the monthly bill come. Where do I get the money to pay back the loan? Won’t I have to sell some assets. Or from my Salary
@JakeBroe 2 жыл бұрын
You don't have to pay a monthly bill. Interest keeps being added to the account balance, but there is no requirement to pay the debt. If you assets grow faster than the debt, then the % of the account that is debt shrinks without you ever having to make any payments your entire life.
@titanshipman6968 2 жыл бұрын
Is it me or do your flags in the back change every video? Anyways great video!
@JakeBroe 2 жыл бұрын
They do change! Thanks for watching Titan!
@titanshipman6968 2 жыл бұрын
@@JakeBroe yeah absolutely, big fan! Hopefully see you in Texas one day
@xrpbluemarvel2566 2 жыл бұрын
Hi Jake I have navy federal but want usaa because of health insurance reason and other things that navy federal doesn’t have
@JakeBroe 2 жыл бұрын
Both are great! But USAA is very strict about only letting in military and family members. Navy Federal is much more relaxed.
@moxiangmingxin 2 жыл бұрын
Do you know what happens if I let a put credit spread expire when breached? Will I buy 100 shares or two put orders in the spread will be closed together automatically with a loss? Thanks.
@DThunder85 2 жыл бұрын
Can you do a similar video but for those of us with more average salaries? Like, can I still borrow against my assets at a significantly less amount?
@JakeBroe 2 жыл бұрын
You sure can, people in the middle class do it all the time. If you refinance your home to pull all the equity out... then as long as your home keeps appreciating at 8-10% a year and your mortgage is only costing you 3% a year, this is the exact same principle. But if you die with debt, then you are just leaving less for your children. But this is true with the example I gave in the video.
@dillonlboyer 2 жыл бұрын
@@JakeBroe How do you leave debt to your children if you are constantly repaying that debt through its monthly payments? Are you saying you don't repay margin debt? Or are you saying the last debt you had outstanding at the time of death is the debt that passes to your children?
@deepthicynthia 2 жыл бұрын
If you have a property that you’ve paid only half can you borrow against it?
@JakeBroe 2 жыл бұрын
Yes, you can, but your lender will factor in to the loan only how much equity you have in the property already.
@marcgardner9865 2 жыл бұрын
From what money are they paying the interest on the loan? From the borrowed money? Only spend half of your borrowed money and use the other half to pay the interest?
@JakeBroe 2 жыл бұрын
You don't ever have to make payments. If the debt is accumulating at $400,000 a year and your assets earn you $8 million MORE in value that year, then the % in debt you have on your assets when down without you ever having to make a payment. Your bank knows this and doesn't care if you make payments. They know they will be paid some day... lol
@SuperM4000 2 жыл бұрын
So then my question is, why do companies like schwab, fidelity, etc. lend at 4% when they themselves could invest and get 8%? I think risk adjusted rate of return plays into this?
@JJ-nu8qi 2 жыл бұрын
My exact question. Why not just cut out the middle man like say Blackrock does?
@lolwtnick4362 2 жыл бұрын
they "invest" in you. ask a small bank. they play the spread and have their own risk instead of market risk.
@dillonlboyer 2 жыл бұрын
@@lolwtnick4362 I would guess people repaying loans is less risky than the market crashing? Though if the market crashes, people have trouble repaying their loans, but the banks have more methods to collect on that money regardless of what the market does. If the market crashes, there is no way to recover that investment revenue stream except waiting for the market to recover
@joemakamanivong 2 жыл бұрын
Here's my question if I borrow $10 millions I still have to pay back to the bank the $10 million plus interest correct? So say my payment is 100k a month now where am I gonna get that money from? So i borrow $10 million and paying it back $10 mill plus interest, makes no sense?
@JakeBroe 2 жыл бұрын
Hey joe! There is no payment. Your assets are used as collateral for the loan to remain outstanding. You can never pay back any part of the loan and the bank just keeps adding on the interest. As long as your assets grow faster than the interest you are accumulating on the loan, then as a %, the amount you owe goes down. That $10 million should be making you money in the market that brings in more than the growing interest on the debt.
@johnmartinez6800 2 жыл бұрын
What does one's net worth need to be for this strategy to make sense?
@JakeBroe 2 жыл бұрын
Realistically... I would say having $2 million in invested assets would be a good start. At a 20% debt rate, you could pull out $400,000 and live pretty comfortably. As long as you assets outpaced the interest on your debt, you can comfortably ignore it until you die.
@laughoutmeow 9 ай бұрын
I dont understand whats stopping from someone with 2-3 million from borrowing 1 million at 4% interest?
@glorias.2930 2 жыл бұрын
So curious what your thoughts are on the ARK Innovation ETF! Could this explode?!
@JakeBroe 2 жыл бұрын
Hey Gloria! I think ARK is over valued and as soon as the market starts contracting, they will be hit the hardest. Check out my video on them here: kzfaq.info/get/bejne/hq2FiJmF3aqqc4U.html
@glorias.2930 2 жыл бұрын
@@JakeBroe Thank you! Checking now...
@kikolatulipe 2 жыл бұрын
Debt, a double edge sword ! One word as a reminder : Archego, Bill wang
@JakeBroe 2 жыл бұрын
well... leveraging at a rate of 9:1 is pretty dumb... they deserved to lose everything
@sumonigupta 2 жыл бұрын
Your point about Equity as salary... Don't they pay federal taxes on equity distribution and LTCG/STCG when they sell those stocks? I am confused!
@sumonigupta 2 жыл бұрын
@chillrobp vesting events are taxed too, irrespective of selling after vesting!
@JakeBroe 2 жыл бұрын
Nothing is sold. They just borrow against it. If they hold it until they die, then their beneficiary can sell without paying taxes.
@bryan17716 2 жыл бұрын
The company equity (rsu’s) are counted as income when they vest. They would then pay stcg or ltcg when they sell for a profit (if they sell)
@nicholasgaspard4876 2 жыл бұрын
👍🏻👍🏻
@JakeBroe 2 жыл бұрын
Thanks Nicholas!
@userwink 3 ай бұрын
You don't mention that the money you borrow is compounded every year after year while tax is a one time expense.
@juliusjames6229 2 жыл бұрын
Why only three generations?
@curtowen89 2 жыл бұрын
When the rich borrow money what do they use to pay it back? Am I missing something?
@JakeBroe 2 жыл бұрын
Hey Curtis! There is no requirement to make payments on the debt. It's not like a car loan or student loans. Rich people can borrow and not make monthly payments. Interest keeps getting added every month to the debt by the bank, but as long as the assets grow faster than the debt, then the percentage of debt relative to the account actually goes down, even without payments being made. Yes, someday it has to be paid off, but you can just die and then let your kids settle that. Thanks to the step-up in basis, no taxes will be paid from the sale of assets to clear the debt at death.
@curtowen89 2 жыл бұрын
@@JakeBroe thank you for your video and clarification.
@tentimetex 2 жыл бұрын
I feel like now that this information is getting out there, the governments will soon change the rules. The more people find out about this thanks to the internet, the more governments will have to react by changing the rules of the game. Its just a question of time before this strategy is no longer so attractive to implement.
@Putseller100 2 жыл бұрын
I was thinking something along that line too. However there are 2 things that will keep people from doing this. First you will need a good amount of money, wanna say at least 500k? Right there is a hinderance and will eliminate tons of people from trying it. Second it still takes some brass balls to pull this off. Many people will be downright scared of taking a loan against an asset that could very well go down in price. If they don’t have a steady source of income many people may pass on this idea entirely.
@KazeClips 2 жыл бұрын
Wouldn't this also work for not-as-rich people? Borrowing 50k when you have 100k in assets, 4% gain yearly... that's still a nice 2k in passive income expected returns.
@JakeBroe 2 жыл бұрын
Sure, lots of people do this. They borrow in the brokerage account on margin to buy more stocks. But if the market has a 20%-30% down year, then you lose twice and much and risk being margin called if you fall below requirements.
@lou9387 2 жыл бұрын
Why does an institution loan out at 4% when they themselves could make 8% elsewhere?
@JakeBroe 2 жыл бұрын
That 4% is a guarantee this year but that 8% is not.
@craigchambers4183 2 жыл бұрын
I do know something you don't. But not about taxes. Or being rich. Or trading. :-)
@JakeBroe 2 жыл бұрын
Haha, I don't know everything! But I am learning as much as I can at a very fast pace. Everyone knows something useful they can teach to someone else!
@onuohafamily 2 жыл бұрын
Can I get a small loan of a $100 million to start this 😭
@JakeBroe 2 жыл бұрын
If you find someone to front that much, then put in a good word for me.
@eizicoin190 2 жыл бұрын
🤟🏼
@JakeBroe 2 жыл бұрын
Cheers Eitan!
@darthstarone3532 2 жыл бұрын
KILLA👋😮👋🙌🦈🙌
@CarlosBattousai 2 жыл бұрын
So unless your rich you can't buy borrow die.... Cool I have no problem with the rich avoiding taxes and keeping their money I'm trying to do the same thing. My beef is unless I have a few Mil I can't even try ~_~
@JakeBroe 2 жыл бұрын
Yep... dems the rules!
@bryan17716 2 жыл бұрын
This is not 100% accurate - the equity or RSU’s are taxed as income when they vest.
@ccstarz19 2 жыл бұрын
When they are exercised, not vested, but, a lot of high level executives will be on an automatic sell schedule, at which point they'll be taxed, yes.
@bryan17716 2 жыл бұрын
@@ccstarz19 It looks like my comment was deleted (potentially due to links to outside KZfaq resources?). In short I don’t want individuals thinking that people don’t pay taxes on RSU’s as this would be incorrect. They in fact do pay income taxes on RSU’s as they are counted as income on the day of vest. Just do a quick search for “how are RSU’s taxed”. Chris, you may be referring to Stock Options which is a different beast altogether than RSU’s and something I don’t see much or at all in compensation plans anymore. Those are taxed differently - when you sell, but again I really don’t see this type of compensation anymore at least in tech.
@lolwtnick4362 2 жыл бұрын
hmm another fast cheap way is go into debt, then bankruptcy. do it again and die, life insurance! which is tax free. just sayin.
@SweetNeoCon407 2 жыл бұрын
The debt pay back was kind of quickly glanced over IMO.
@JakeBroe 2 жыл бұрын
Yeah, but the debt doesn't matter. That's the point. As long as the principal grows faster than the debt, then it never has to be paid.
@Greg-mh2ku 2 жыл бұрын
@@JakeBroe this confuses me as well…so they don’t have a monthly minimum to have to pay back?
@JakeBroe 2 жыл бұрын
@@Greg-mh2ku , no, there is no monthly payment. As long as you stay in debt, the bank is making money off of you. There is no risk to them since they seize your securities if your fall below their margin lending rates. You can maintain this loan forever and the interest just keeping being added each month.
@airrun88 2 жыл бұрын
Think of this for a moment. If you make $25,000,000 a year Subtract a Tax at 75% total Divide by 26 pay periods Divide by 80 hours You are making over $3,000 an hour after that tax. Compare that to a nurse helping COVID patients If they are travel nursing they make about $27 an hour after tax. ($94k a year, 40% tax bracket) (ranges from state to state.) If they aren’t traveling the after tax hourly is somewhere around $19 an hour. Imagine being a builder for a mega rich sky scraper making $25 an hour before taxes getting taken out.
@meatball4409 2 жыл бұрын
ok?
@robcollins1501 2 жыл бұрын
$87M = “Basically Poor” 🤣😂
@Gutch220 2 жыл бұрын
it's amazing how the government thinks they have dibs on your earned money. it's like, it's all of their money in the first place, and you should be lucky to keep what they deem appropriate,
@JakeBroe 2 жыл бұрын
I'm currently serving on active duty military and my salary is entirely paid for with US tax dollars. If these guys pay nothing in federal taxes... who do you think is supposed to pay my salary then?
@Gutch220 2 жыл бұрын
@@JakeBroe Citizens should pay their taxes. And the government shouldn't treat people like a bottomless ATM machine to unilaterally invent taxes that everyone needs to pay. They are like the mafia or a cartel. They choose whatever number they want, and you need to pay or they put you in prison. What gets me (and I wish I was in a position to benefit from this) is the estate tax when you die. You go a lifetime, "paying" taxes and at the end of your life, your lifetime's work is now somehow taxed AGAIN by the government. They tax you when you earn it, when you spend it, when you save it, when you invest it, when you pass it down. The mega rich people should definitely pay taxes on their earnings, but the whole system should be much simpler so these legal tricks shouldn't even exist. In return the government should ease up on taxing every single nook & cranny of society and funding the government on our credit card.
@Chris.Brisson 2 жыл бұрын
Give unto Caesar that which is Caesar's.
@polppppcheesecake Жыл бұрын
WHO PAYS THE LOAN BACK EACH MONTH?
@itsarchi5968 2 жыл бұрын
RICH PEOPLE: Take personal loans to pay for their lifestyle. ME: Taking a car loan so I can go to work. (btw, my car is paid off)
@JakeBroe 2 жыл бұрын
Truth... probably driving to a job that earns taxable W-2 income. The mega rich are laughing at us, lol
@polppppcheesecake Жыл бұрын
All these videos are the same, never sais who pays back the loan each month.
@Chris-fg7bx 5 ай бұрын
This doofis makes it sound like free money and a glitch. He makes it sound like a bank doesn't care about interest on a $10M loan. Banks are not a charity. Loans in this vid are generally variable interest so when interest rates go up, so does the money these rich folks half to repay. Deferring any type of payment to your kids would subject the loan to even more interest rate volatility. People who take these loans out generally do to fund short-term projects and repay them in their entirety in a few years at most. This is also done because of stock market volatility. If the market goes down, the collateral is worth less which makes banks panic and they may readjust terms of your loan because of this
@chrisvinci5417 2 жыл бұрын
The rich shouldn't really have to pay taxes. They did so much to benefit our economy already.
@JakeBroe 2 жыл бұрын
lol
@jantelopez5626 2 жыл бұрын
what like undermining democratically decided policies by buying politicians and media, marketers and advertising to push whatever line they want so loud that people believe any old sh*t they wheel out. If rich people had to compete on a level playing field they'd have to actually have skills someone could use and the finance industry wouldn't be designed around maintaining overvalued mediocre skills better performed by algorithms . And if they actually paid for stuff and weren't allowed to profit from other peoples efforts they wouldn't be that rich very long
@jacklnu1614 2 жыл бұрын
They should have to pay for nothing. That way they can stay rich.
@polppppcheesecake Жыл бұрын
WHO PAYS THE LOAN BACK EACH MONTH?
@polppppcheesecake Жыл бұрын
WHO PAYS THE LOAN BACK EACH MONTH?
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