I’ve seen in a few places that the super-rich can unlock their wealth ‘tax free’ by taking out a loan secured against their shareholdings or other assets, then use the cash from the loan to buy real stuff.
But how do they pay back the loan?
In: 196
In many cases, they keep making the interest payments until they pass away, then their estate is used to settle their loans.
They do this because selling stock is taxed, but loans aren’t. And the interest payments on loans is far lower than the taxes due from a stock sale. This allows their stock portfolio (and thus wealth) to keep growing, and growing much faster than it would if they kept selling stock to fund their lifestyle.
Latest Answers