Buy, Borrow, Die – Explained
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Buy, Borrow, Die – Explained
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Re: Buy, Borrow, Die – Explained
#2[flagged]
Re: Buy, Borrow, Die – Explained
#3[flagged]
Upvoted, but that's a bad reason to stop reading. This isn't a how-to guide. This is an explanation to the rest of us of about how our tax laws are so full of holes and that the very rich can create schemes for multigenerational transfer of wealth without ever paying tax. The people with the money to do this already know it's possible, and know how to hire the people to do it. This article is to help the rest of us understand what's going on.
Re: Buy, Borrow, Die – Explained
#4EDIT: I'm not sufficiently sure that this comment was accurate on US tax laws so I'm going to delete it.
Re: Buy, Borrow, Die – Explained
#5I don't understand what's in it for the lender in the borrow stage.
Re: Buy, Borrow, Die – Explained
#6EDIT: I'm not sufficiently sure that this comment was accurate on US tax laws so I'm going to delete it.
The cost basis of the asset can be "The fair market value (FMV) of the property on the date of the decedent's death".
Source: https://www.irs.gov/faqs/interest-dividends-other-types-of-i...
Re: Buy, Borrow, Die – Explained
#7>Let's assume the asset appreciates at an annual rate of 8 percent
Quite a lot of value creation going on. Good on them!
Re: Buy, Borrow, Die – Explained
#8I don't understand what's in it for the lender in the borrow stage.
The article clarifies this?
> Generally, in exchange for such favorable terms (i.e., interest-only, matures on death), the bank will ask for a share of the collateral’s appreciation (essentially, "stock appreciation rights"), and this obligation will be settled upon the borrower’s death along with the loan. The amount of the bank’s share of the collateral’s appreciation depends on many factors and it is fundamentally a matter of the bank’s underwriting process.
Re: Buy, Borrow, Die – Explained
#9EDIT: I'm not sufficiently sure that this comment was accurate on US tax laws so I'm going to delete it.
The cost basis of the asset can be "The fair market value (FMV) of the property on the date of the decedent's death". Source: https://www.irs.gov/faqs/interest-dividends-other-types-of-i...
Yes, the cost basis for the inheritor, not for the deceased/estate.
Re: Buy, Borrow, Die – Explained
#10I don't understand what's in it for the lender in the borrow stage.
Yeah, I felt like the “you have to be wealthy” hand-waving in the quoted section wasn’t very explanatory. Are lenders giving the ultra-rich great interest rates here as a loss-leader to try to attract other business from them?
> First, this type of planning is generally not economically feasible unless the taxpayer has a net worth exceeding around $300M. If you’re worth less than that, you’re not going to be able to command attractive loan/line of credit terms from investment banks. You’re going to have to get a plain vanilla product from a retail lender which is going to have relatively high interest rates (typically the Secured Overnight Financing Rate plus some amount of spread) and other terms that make implementing “buy, borrow, die” expensive enough that you aren’t much better off (or you’re much worse off) than you would have been had you sold the asset and taken the after-tax proceeds. (Caveat: even loans/lines of credit at retail interest rates can still be very useful for short-term borrowing needs.) Clients with a net worth exceeding around $300M, however, can obtain bespoke products from the handful of lenders that specialize in this market, and the terms and conditions of these products make “buy, borrow, die” a no-brainer for virtually everyone who has this level of wealth.