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Buy, Borrow, Die – Explained

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Re: Buy, Borrow, Die – Explained

#191

Post by erehweb »

danpad wrote: post #109
TrackerFF wrote: post #85

It always puzzled me how tax-adverse some wealthy people are. I'm not talking about the wealthy people that have 100% of their wealth tied up to company (stock) that they operate - but the wealthy people that are just asset-rich, with zero operational duties. Their wealth is handled by wealth managers, they probably don't even know what they own. But minimizing taxes and hoarding wealth is priority number 1.

I don't think it's that unfathomable when you look at how governments spend the money. E.g. a public Czech university spent 80k euros to change their logo from this: https://cdn.xsd.cz/resize/21404adf37a83977870fe87fe0eb4ea6_r... to this: https://www.em.muni.cz/cache-thumbs/logo_muni_web-1580x790-2... Why does a public university, one of the most popular in the country, need a new logo? And if it needs a new logo, wh…

Branding is important and should be done by professionals. It makes my eyes hurt to look at the original logo - the 80K was money well spent.

Re: Buy, Borrow, Die – Explained

#192

Post by twoodfin »

yojo wrote: post #56
chung8123 wrote: post #33

This seems to only be interesting if you have a lot of money tied up in a company and would like to realize some of that money without losing control of the company. Seems like a lot of risk otherwise. One bad year could have the house of cards crumbling.

I will never have this kind of money. It is still interesting to me from the perspective of understanding whether there is validity to claims that the rich are/aren’t paying their fair share. Assuming the write-up is correct, it provides substantial evidence that the ultra-wealthy are capable of sheltering gains in ways that I am not. As to the risk issue, I see no reason why the “asset” couldn’t be a combination of…

It’s actually much easier for you to “shelter gains” in this way: You don’t have to worry about estate taxation.

Anyone can borrow against assets (securities and otherwise) they own. Home equity loans are big business, and securities-backed loans aren’t obscure below $300M.

Frankly, it’s the “but the ultra-rich get special low-interest loans” bit that’s the most unbelievable part of the write up. But it’s also the keystone: Without these magic loans, it’s just standard estate planning (which is all about tradeoffs of taxes vs. control) + a likely suboptimal investment strategy.

Re: Buy, Borrow, Die – Explained

#193

Post by justsomehnguy »

SoftTalker wrote: post #95
TrackerFF wrote: post #85

It always puzzled me how tax-adverse some wealthy people are. I'm not talking about the wealthy people that have 100% of their wealth tied up to company (stock) that they operate - but the wealthy people that are just asset-rich, with zero operational duties. Their wealth is handled by wealth managers, they probably don't even know what they own. But minimizing taxes and hoarding wealth is priority number 1.

Why does this puzzle you? It seems like completely expected behavior to me. Most people try to minimize taxes. Who do you know that gladly pays more than they legally have to pay?

> Who do you know that gladly pays more than they legally have to pay?

What paying more in taxes gets more done in the things paid by taxes.

It's like there is a direct dependency between a money received from the taxes and the things made/built on the tax money.

Re: Buy, Borrow, Die – Explained

#194

Post by throwawaymaths »

erehweb wrote: post #191
danpad wrote: post #109

Earlier quoted context omitted.

I don't think it's that unfathomable when you look at how governments spend the money. E.g. a public Czech university spent 80k euros to change their logo from this: https://cdn.xsd.cz/resize/21404adf37a83977870fe87fe0eb4ea6_r... to this: https://www.em.muni.cz/cache-thumbs/logo_muni_web-1580x790-2... Why does a public university, one of the most popular in the country, need a new logo? And if it needs a new logo, wh…

Branding is important and should be done by professionals. It makes my eyes hurt to look at the original logo - the 80K was money well spent.

My eyes hurt from the second logo

Re: Buy, Borrow, Die – Explained

#195

Post by Kon-Peki »

This explanation gets very hand-wavy when it comes to explaining how much the lawyers and investment bankers get paid.

Think about this: how much would you pay to Bobby to avoid paying $1000 to your Uncle Sam? You are technically better off even if you pay $999…

I have no doubt that Mortimer Silverspoon III is better off, and that the taxpayers as a whole are worse off. But I bet that the real winners are the partners at Quahog Sachs and Dewey Cheatem & Howe LLP. The complex paperwork and the decades between origination and conclusion probably make it nearly impossible for anyone else to know who came out on top. But we definitely know who lost.

Re: Buy, Borrow, Die – Explained

#196

Post by doe_eyes »

This kind of an explanation overlooks the obvious issue: you're exposing yourself to asset valuation risk. We don't tax unrealized gains for that exact reason.

Let's say you have $10M in in index funds. You don't want to cash out and pay capital gains, so you get a $5M credit line with your stock as a collateral. Then, there's a market crash, your collateral is all of sudden worth just $4M, and you have a bank knocking on your door - but you already spent $5M on a McMansion. Now what?

You can opt for "risk-free" assets, but then, if they're truly risk-free, they're probably not appreciating in a way that would make this tax gamble worth your time.

Re: Buy, Borrow, Die – Explained

#197

Post by throwawaymaths »

TrackerFF wrote: post #85

It always puzzled me how tax-adverse some wealthy people are. I'm not talking about the wealthy people that have 100% of their wealth tied up to company (stock) that they operate - but the wealthy people that are just asset-rich, with zero operational duties. Their wealth is handled by wealth managers, they probably don't even know what they own. But minimizing taxes and hoarding wealth is priority number 1.

If I were a billionaire I would avoid as much tax as possible and invest an equivalent amount in things like food banks and natural space conservation because the government is absolute shit at those things.

Re: Buy, Borrow, Die – Explained

#198

Post by aaplok »

danpad wrote: post #109
TrackerFF wrote: post #85

It always puzzled me how tax-adverse some wealthy people are. I'm not talking about the wealthy people that have 100% of their wealth tied up to company (stock) that they operate - but the wealthy people that are just asset-rich, with zero operational duties. Their wealth is handled by wealth managers, they probably don't even know what they own. But minimizing taxes and hoarding wealth is priority number 1.

I don't think it's that unfathomable when you look at how governments spend the money. E.g. a public Czech university spent 80k euros to change their logo from this: https://cdn.xsd.cz/resize/21404adf37a83977870fe87fe0eb4ea6_r... to this: https://www.em.muni.cz/cache-thumbs/logo_muni_web-1580x790-2... Why does a public university, one of the most popular in the country, need a new logo? And if it needs a new logo, wh…

80k Euros is not even a rounding error in the budget of the Czech government. The last thing you want is them micromanaging that kind of decision because it would end up costing a lot more and make everyone's life terrible.

Re: Buy, Borrow, Die – Explained

#199

Post by delta_p_delta_x »

danpad wrote: post #109
TrackerFF wrote: post #85

It always puzzled me how tax-adverse some wealthy people are. I'm not talking about the wealthy people that have 100% of their wealth tied up to company (stock) that they operate - but the wealthy people that are just asset-rich, with zero operational duties. Their wealth is handled by wealth managers, they probably don't even know what they own. But minimizing taxes and hoarding wealth is priority number 1.

I don't think it's that unfathomable when you look at how governments spend the money. E.g. a public Czech university spent 80k euros to change their logo from this: https://cdn.xsd.cz/resize/21404adf37a83977870fe87fe0eb4ea6_r... to this: https://www.em.muni.cz/cache-thumbs/logo_muni_web-1580x790-2... Why does a public university, one of the most popular in the country, need a new logo? And if it needs a new logo, wh…

80K euro might sound like a lot until you realise it is around the combined annual salary for two mid-level employees in Western Europe, and for about a team of four to five in Eastern Europe.

To ask a team of designers to do brand and marketing research and design a new logo for a big organisation that will use said logo everywhere is not a 1K euro freelancer job.

To be fair, the new logo is a bit crap, but in the grand scheme of things, 80K is not a lot at all.

Re: Buy, Borrow, Die – Explained

#200

Post by HDThoreaun »

doe_eyes wrote: post #196

This kind of an explanation overlooks the obvious issue: you're exposing yourself to asset valuation risk. We don't tax unrealized gains for that exact reason. Let's say you have $10M in in index funds. You don't want to cash out and pay capital gains, so you get a $5M credit line with your stock as a collateral. Then, there's a market crash, your collateral is all of sudden worth just $4M, and you have a bank knocki…

The people utilizing this strategy are consuming on the order of .1% of their wealth a year. They face effectively zero risk of default or liquidation because theyre not taking a loan against half their portfolio.
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