August 2, 2025 • 25 mins
Ever wondered how billionaires seem to play by a different set of financial rules? Welcome to "Buy, Borrow, Die: The Secret Playbook of the Ultra-Wealthy"—the podcast that rips the velvet curtain off the most controversial tax strategy the rich don’t want you to know about.
In this eye-opening episode, we dive deep into the world of Buy Borrow Die, the ultimate wealth management hack that lets the ultra-wealthy minimize taxes, maximize asset growth, and pass on fortunes tax-free. Discover how the rich sidestep traditional income taxes, leverage appreciating assets like stocks and real estate, and use asset-based lending to unlock cash—without ever selling or triggering capital gains tax. We break down the realization principle, expose the loophole of the step-up in basis, and reveal how generational wealth is built and protected.
Is it genius, unfair, or just the ultimate financial cheat code? You decide. Whether you’re a finance nerd, aspiring millionaire, or just tired of paying more than your fair share, this episode will change the way you see money, taxes, and the American Dream.
Ready to learn the secrets the rich hope you never find out? Hit play, share with a friend, and subscribe for more jaw-dropping financial revelations. Your journey to understanding (and maybe even using) the world’s most powerful tax strategies starts now!
Become a supporter of this podcast: https://www.spreaker.com/podcast/life-hacks-diy-more-transform-your-everyday-with-simple-tricks-and-diy-magic--5995484/support.
In this eye-opening episode, we dive deep into the world of Buy Borrow Die, the ultimate wealth management hack that lets the ultra-wealthy minimize taxes, maximize asset growth, and pass on fortunes tax-free. Discover how the rich sidestep traditional income taxes, leverage appreciating assets like stocks and real estate, and use asset-based lending to unlock cash—without ever selling or triggering capital gains tax. We break down the realization principle, expose the loophole of the step-up in basis, and reveal how generational wealth is built and protected.
Is it genius, unfair, or just the ultimate financial cheat code? You decide. Whether you’re a finance nerd, aspiring millionaire, or just tired of paying more than your fair share, this episode will change the way you see money, taxes, and the American Dream.
Ready to learn the secrets the rich hope you never find out? Hit play, share with a friend, and subscribe for more jaw-dropping financial revelations. Your journey to understanding (and maybe even using) the world’s most powerful tax strategies starts now!
Become a supporter of this podcast: https://www.spreaker.com/podcast/life-hacks-diy-more-transform-your-everyday-with-simple-tricks-and-diy-magic--5995484/support.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to the deep Dive, where we sift through the sources,
pull out the most important insights, and deliver them to you.
Ready for your mind. Today, we're plunging into a financial
puzzle that probably sounds familiar. You've heard the anecdote, right,
the one about a billionaire not bothering to pick up
one hundred dollars bill if it fell out of their
pocket and landed on the sidewalk. The common wisdom says
(00:20):
it's because in the few seconds it would take to
bend down and retrieve it, they would have already earned
significantly more just by standing still.
Speaker 2 (00:28):
It's an intriguing image, isn't it a classic? And while
that simple story maybe captures a tiny bit of truth,
what's really fascinating, I think is how it hints its
something much deeper, more fundamental truth about how the ultra
wealthy generate and manage their fortunes. It's not just about
the time value of money right then and there. It's
about the very nature of their financial reality, which is
(00:50):
well dramatically different from what most of us experience day today.
Speaker 1 (00:53):
Okay, yeah, let's unpack this. Then. Our mission with this
deep dive is to explore these lesser known mechanisms, you know,
how wealth actually accumulates and gets transferred to the very top.
We're dissecting how the ultra rich navigate financial systems in
ways that really diverge significantly from the average person's experience.
We're trying to go behind the curtain reveal how that
(01:15):
top tier of wealth operates. The material we've gathered it
offers a unique window into these very specific, highly effective strategies.
It's genuinely eye opening stuff, and I think it might
fundamentally shift how you view wealth itself.
Speaker 2 (01:30):
Yeah, and when we connect this to the broader financial landscape,
it becomes really clear how the structure of wealth itself,
not just the sheer amount, right, dictates a completely different
set of rules for financial engagement. For the vast majority
of people, our financial ads revolve around what we earn,
our jobs.
Speaker 3 (01:45):
Our labor.
Speaker 2 (01:46):
But for this super wealthy it's not just a different scale,
it's a completely different game, entirely different rule book exactly.
Speaker 1 (01:52):
For most of us, when we talk about wealth, we're
really talking about income. It's about how much money hits
our bank account from our job, right, that's what we
live on. We work hard, we get a paycheck, maybe
a bonus if we're lucky, maybe a raise. Our whole
financial existence or budgeting, planning for the future. It's often
built around that monthly cash flow. That's stream of income
and society well, it conditions us from pretty young to
(02:15):
see getting a higher salary, a bigger bonus as the
main measure of financial success. We celebrate promotions, we talk
about income brackets. It's the metric we understand because it's
the reality for well almost everyone. It feels like the
only way to build wealth.
Speaker 4 (02:29):
But this immediately brings up a really crucial point. If
traditional income, the kind most people rely on, is tax
so heavily, what's the alternative for those accumulating vast fortunes.
It's the truth that often surprises people I find. But
for the ultra wealthy, that traditional income, as most of
us think of it is often seen as a big problem,
something they actively try to avoid. And the core reason
(02:52):
it's simple aggressive taxation. In the US, someone in the
highest income bracket can lose what up to thirty seven
percent of their earned income just to federal taxes, and
that's before you even factor in state income taxes, which
can be pretty hefty in places like California or New York. Oh,
and payroll taxes too.
Speaker 2 (03:10):
When you add all that up, you could be looking
at well over half your earned income going straight to taxes.
So this is precisely why the wealthiest individuals find ways
to structure their financial lives to avoid or at least
dramatically minimize that kind of traditional, highly taxed income.
Speaker 1 (03:25):
Okay, here's where it gets really interesting and maybe a
bit mind bending for folks. How did these titans of industry,
you know, people running massive companies names everyone knows, how
did they get by on what seemed like incredibly tiny salaries.
It completely flips our understanding of executive pay on its head.
We're talking figures that seem modest even for a mid
level manager, let alone the CEO of some huge corporation
(03:47):
like Elon Musk right famous for taking exactly zero dollars
in pay from Tesler for multiple years, or Warren Buffett,
legendary investor He's kept a base salary of just one
hundred thousand dollars a year for like forty years at
Berkshire Hathaway forty years. Jeff Bezos back when he was
CEO of Amazon, his salary was around eighty thousand a
year and Mark Zuckerberg his base salary at Meta is
(04:09):
literally one dollar, a single dollar. And these aren't just
weird one officer quirks. This is a common strategy among
the very rich. It's illiberate, meticulously planned structure the compensation
to minimize that highly taxable income, which just begs the question, right,
how on earth do they afford their lifestyles, their investments
if not through salaries.
Speaker 5 (04:26):
Right, And to understand that, you really need to shift
your whole perspective. This isn't about a labor based income
model anymore. It's a capital based wealth model. Their wealth
isn't sitting around as liquid cash and checking accounts, you know,
earning peanuts or gathering dust. It's primarily held in equity.
We're talking about shares in the companies they've built or
invested in, big stakes in private businesses, positions and investment funds.
(04:48):
Other appreciating assets could be huge real estate holdings, valuable
ip even like major art collections. The crucial point is
this wealth is locked into assets designed to grow over time,
and fundamentally though those assets aren't taxed as long as
they aren't sold. This really highlights a core aspect of
the tax system. It quietly but profoundly benefits capital over labor.
(05:09):
It's kind of designed to encourage investment, risk taking, accumulating assets.
Not necessarily a flaw maybe, but it definitely creates a
distinct advantage for those whose wealth comes from capital.
Speaker 1 (05:18):
Yeah, and this leads us right to a key concept
accountants called the realization principle. It's a really powerful idea
because it basically dictates that you don't pay tax on
the gains of an asset until you actually sell it,
until those gains are realizing to cash. So if your
investment skyrockets and value, you're richer on paper, sure, but
you don't owe a dime in taxes until you choose
(05:39):
to cash out. Think of it like having a treasure chest. Right,
you keep adding jewels, rare coins, Its value climbs and climes.
The chest gets heavier, way more valuable, But the tax
collector they only care if you actually open it and
start taking stuff out to spend. As long as it
stays closed full of potential value, it's just an unrealized gain.
You owe nothing on it. Consider something to tangible like
(06:00):
your house. Let's say you've bought it for one hundred
thousand dollars twenty years ago. Today it's appraised at one
million dollars. You don't suddenly have nine hundred thousand dollars
sitting in your bank, do you. The value is locked
up in the property. You'd have to sell it to
get that cash. And because you haven't sold it, the
irs isn't knocking on your door demanding taxes just because
the house went up in value on paper. This principle
is absolutely key for the ultra wealthy. The strategy is
(06:22):
often to never sell anything unless they absolutely have to,
because the second they sell, boom, they trigger a potentially
massive tax bill.
Speaker 2 (06:31):
Exactly, this realization principle is truly foundational. It's how wealth snowballs,
often silently and rapidly, without hitting those tax triggers that
most people deal with constantly. It lets their fortunes compound
expand exponentially, largely unburdened by the annual tax hits that
would otherwise chip away at the growth. I mean, for
the average person, every paycheck, every bonus, any traditional income
(06:54):
gets taxed right away, right reducing what's left to save
or invest. But for the ultra wealthy, their main wealth
vehicles their assets can appreciate for decades, even generations, completely
free of tax implications until or unless they're eventually sold.
This means the money they've invested just keeps working for them,
compounding interest on top of interest year after year without
(07:15):
that tax track. It's really the essence of how capital
gets favored in the current financial system. And look, there
are practical reasons for this too. Imagine the chaos if
everyone had to calculate and pay taxes on every tiny
daily wiggle in their stock portfolio value or on their
house value fluctuating. But this administrative necessity billy It invertently
creates this huge advantage for long term wealth accumulation.
Speaker 1 (07:36):
Right, So, while the rich are busy figuring out how
not to sell their appreciating assets, most of us are
dealing with a totally different financial reality. We're constantly grappling
with how to pay off our debts.
Speaker 6 (07:49):
It's such a stark contrast, isn't it Almost poetic in
a way. When most people take out a loan for
a house, a car, even just using a credit card,
they're entering this financial relationship where the terms often feel
well heavily stacked against them. And this isn't just a
small thing. It's a fundamental dynamic that can trap people,
families in this cycle of payments that feels like it
just never ends, like a financial treadmill you can't get off.
Speaker 7 (08:11):
Yeah, And that leads us to a really important question.
Why are the rates for consumer loans so well disproportionately
high compared to other types of lending. It basically boils
down to how banks perceive risk, how they meticulously assess
it for the average borrower. Let's just look at the
numbers for a second to get the scale. The average
US household carries what about one hundred and forty eight
thousand dollars in mortgage debt, part of an almost twelve
(08:33):
point six trillion dollar national total. That's huge, And with
thirty year fixed mortgage raised lately around six point eight
five percent, nearly double what they were just a couple
of years back, this is not easy debt to handle.
Think about a common scenario, say a two hundred and
fifty thousand dollars mortgage at that six point eighty five
percent over thirty years, your monthly payment is roughly sixteen
hundred dollars. Now, if you stick to that schedule for
(08:54):
the full thirty years, you'll actually end up repaying around
five hundred and seventy.
Speaker 8 (08:57):
Six thousand dollars, more than double what you borrowed.
Speaker 2 (08:59):
Innitie.
Speaker 7 (09:00):
And here's the real kicker, the part that exposes the trap.
For the first decade, maybe even longer, almost all of
that payment goes straight to interest. It barely touches the principle.
Speaker 2 (09:08):
You're essentially paying this huge premium just for the privilege
of living in a home you don't truly own yet,
not building equity like most people imagine. And this gets
even worse with other debts. Right credit card rates often
hit eighteen percent, twenty percent, even twenty five percent. They
just strip away incredible value. Auto loans, student loans, they
follow suit, locking people into these long repayment schedules that
(09:30):
just drain their earnings year after year.
Speaker 1 (09:32):
It really is like running on that treadmill where the
ground keeps shifting. You're working so hard, putting in the hours,
but a huge chunk of your earnings isn't really yours.
It's just covering the cost of borrowing money you never
really got to fully benefit from in the first place.
And this is where the double squeeze comes in making
it even tougher. It's not just the high interest rates.
You're forced to make those loan payments with after tax income.
(09:54):
Let's use that mortgage example again. If your annual payment
is say nineteen two hundred dollars, To actually have that
nineteen two hundred dollars after taxes, you need to earn
something like twenty nine five hundred dollars before taxes, assuming
maybe a thirty five percent combined tax bracket. So you're
paying income tax and interests simultaneously on basically the same
pot of money. This double squeeze is exactly why it
(10:17):
feels impossible for many people to escape the rat race.
You take out loans, the payments come from money that's
already been taxed, and then you pay the bank substantial
interests on top of that. It's an incredibly efficient system
for well extracting value, trapping people in a cycle where
they feel like they're just working to stand still.
Speaker 2 (10:32):
And from the bank's viewpoint, this system is really designed
to extract maximum value from those they consider higher risk.
While you're making those hefty payments, the bank ironically sees
themselves as taking basically zero risk on these loans. Why
because they've collateralized the assets simple as that your house,
your car, may be equipment for a small business. If
(10:53):
you miss enough payments, they just take it back. Then
they resell it, often getting back their principle and maybe
even more, which leads to at maybe settling but accurate statement.
In many ways, you don't truly own your home until
that last payment clears the bank does. You're essentially just
renting it from them for potentially decades. This whole mechanism,
while seeming straightforward, is incredibly effective at shifting wealth and
(11:15):
value from working in middle classes towards financial institutions.
Speaker 1 (11:18):
So it really isn't just about how much you earn
on paper, It's about how you hold your money, and crucially,
how much you own outright, free and clear and understanding
this difference leads us perfectly into seeing why the buy
borrowed die strategies even possible for the ultra wealth. The
bank at its core doesn't actually care that much about
your salary figure in isolation. What they truly care about
(11:40):
is the safety of their money. Can they get it back?
Think about it, someone making one hundred and fifty thousand
dollars a year but with no real savings, no significant collateral,
maybe a job history that looks a bit volatile. To
the bank, that person is kind of a walking liability.
You might feel like you're doing okay, but you're a
red flag. In their underwriting models. They check credit score,
(12:01):
debt to intome ratio, employment stability, every detail signaling whether
you'll lively pay or if you'll have to go through
the hassle of repossession. That's why someone earning, say just
forty thousand dollars a year, but who owns their house outright,
has cash reserve, stable assets, they might actually be seen
as more bankable, less risky than someone earning two hundred
thousand dollars but drowning in credit card and student mind it,
(12:22):
and that's why consumer loans like mortgages and credit cards
have such high interest rates. You, the borrower, are essentially
paying a premium for the bank's perceived risk and lending
to you right.
Speaker 2 (12:33):
And this brings us to the absolutely crucial distinction that
makes the whole by borrow die strategy work. The average
person borrows a huge amount relative to what they actually own.
That makes them high risks to the bank, trapping them
in those long repayment cycles. The rich. However, they borrow
a comparatively tiny amount relative to the immense value of
the assets they already possess. This makes them inherently low risk,
(12:56):
and it's sophisticated private banks they absolutely love low risk
court these clients. It's a completely different power dynamic.
Speaker 1 (13:02):
Yeah, this is where the financial game just fundamentally shifts.
It's a strategy that honestly almost sounds too good to
be true when you first hear it, and it starts
with what you own, not what you earn through your job.
The buy, borrow die strategy basically unfolds in three phases. First,
you acquire substantial assets that appreciate that grow in value
over time. Then, and this is the key, you don't
(13:24):
sell them. Instead, you strategically borrow money against those assets.
This gives you liquid cash to spend, invest, fund your life, whatever,
all without figuring taxes. And finally, when you die, everything
kind of resets for the next generation, often with incredible
tax advantages built in. It's a really sophisticated, multi generational
way to build and transfer wealth. Let's break down each
(13:45):
phase properly.
Speaker 3 (13:46):
Okay, Phase one, buy This is the absolute bedrock of
the whole thing. It really represents a fundamental shift in
mindset away from just chasing income towards strategically accumulating capital.
This is what separates true wealth accumulation from earning a living.
You know, the wealthy aren't focused on stacking cash and
bank accounts that loses value to inflation and gets taxed
to veteran's interest. Instead, they acquire appreciating assets, things expected
(14:10):
to grow in value, and this covers a huge range.
Big stakes in public stocks, large portfolios of commercial or
residential real estate ownership, and private businesses. They built or
invested in valuable intellectual property, sometimes even rare art or
huge tracts of farmland. The core goal isn't quick flips
for short term profit that would trigger immediate capital gains taxes. No,
the idea is to hold these assets for the long haul, decades,
(14:33):
ideally letting their value compound year after year. This is
exactly why, like we mentioned, major CEOs Musk Zuckerberg are
paid almost entirely in stock or options. Their wealth isn't
sitting in a checking account getting taxed. It's compounding inside
these assets as the.
Speaker 8 (14:47):
Companies grow, and crucially, as long as those assets aren't
sold they're not taxed. That's the unrealized gains principle.
Speaker 2 (14:53):
Again.
Speaker 8 (14:53):
If your stock portfolio grows from one million dollars to
five million dollars, that four million dollar gain no taxes
do unless you sell, You're richer on paper. But the
irs waits same for real estate. Buy a property for
two million dollars. Ten years later, it's worth six million
dollars unless you sell or refinance. No tax on that
four million dollar appreciation. This fundamental principle allows wealth to
just snowball exponentially without the constant friction of taxes swelling
(15:15):
it down. It's a powerful engine.
Speaker 1 (15:16):
Okay, But owning all these appreciating assets, while great for
building wealth on paper, doesn't actually pay the bills, right,
It doesn't fund the jet or pay the staff. So
if you're worth hundreds of millions in assets, but you
absolutely don't want to sell because of the huge tax hit,
how do you actually get cash to live on or
invest more? And this brings us neatly to phase two
borrow hmm. And this is where it gets really interesting
(15:40):
because when you've got a massive diversified portfolio, private banks
aren't just willing to help, they are eager to give
you liquidity. Let's say you own one hundred million dollars
in a mix of stocks in prime real estate. You
don't just walk into your local bank branch. You go
to a private bank think Bolden Sex Private Wealth, JP,
Morgan private bank, maybe a big Swiss bank. You tell them, look,
I need cash for investments, life style, whatever, but I'm
(16:01):
not selling my underlying assets. The private banker, who understands
your net worth inside out, will likely say, okay, let's
set up a credit facility for you. This isn't your
average loan. They'll carefully evaluate all your holding stocks, bonds,
real estate, maybe even that art collection, and they'll offer
you a substantial line of credit based on what's called
a loan to value or LTV ratio. These LTVs are
(16:23):
usually conservative for the bank, maybe fifty percent for liquid stocks,
sixty seventy percent for stable real estate, perhaps hire for
really solid stuff. So with a one hundred million dollars
in real estate, the bank might happily lend you sixty
or seventy million dollars at a very low interest rate,
secured directly by those appreciating assets. And the free money
in aspect here is pretty incredible for the borrower, absolutely
(16:44):
no capital gains tax is triggered because nothing was sold.
You keep owning your appreciating assets, and you get immediate
access to huge amounts of cash. It's honestly the closest
thing the financial system offers to literally free money for
the ultra wealthy.
Speaker 2 (16:56):
Yeah, this is a critical point. The financial rules most
people live by, they just don't apply here in the
same way. A regular person borrowing money faces high interest,
mandatory principle payments each month and has to use income
that's already been taxed before paying the debt. But for
the ultra wealthy, the system sees almost no risk. When
you already own hundreds of millions or billions in assets,
(17:17):
you are the collateral. Your portfolio is the collateral. You're
not just borrowing from the bank, You're kind of partnering
with them. They're leveraging your assets to generate revenue for themselves.
The bank is absolutely thrilled to give you a loan
at a relatively tiny interest rate, because even say two
percent to four percent annually on hundreds of millions or billions,
that's a massive, consistent, low risk income stream for them. Plus,
(17:39):
these wealthy clients usually use the same private bank for
everything else too, right, investment management and state planning, trust services,
family office stuff. It's a whole relationship. This package deal
is precisely why the rich pay less interest, avoid big
tax events by not selling, and get unparalleled access to
credit that turns their paper wealth into usable cash, all
without trick tax liabilities. It's symbiotic, sure, but clearly structured
(18:03):
to benefit the asset holder and the bank.
Speaker 1 (18:05):
Let's make that even more concrete. Say you use this
kind of setup to take out a fifty million dollar
loan secured by your assets at a really good rate,
maybe two point five percent annual interest. How might someone
actually use that cash? Well, maybe five million dollars go
straight to lifestyle stuff, maintaining multiple homes, running the private jet,
paying for staff, maybe significant philanthropy. Another big chunk, say
(18:26):
twenty million dollars could be strategically plowed into new ventures,
high growth investment funds, maybe acquiring more private businesses to
further expand and diversify the portfolio. And the rest maybe
gets rolled right back into buying more appreciating assets, just
strengthening the foundation of the wealth. Now, the annual interest
payment on that fifty million dollar loan at two point
five percent, that's one point two five million dollars a year.
(18:48):
But here's another key detail. Depending on how the loan
is structured and what the funds are used for, that
interest payment might even be tax deductible against other investment income,
further reducing the actual cash cost, and all the while
your original assets they just keep growing. Background. If that
initial one hundred million dollar portfolio grows to one hundred
and fifty million dollars over the next decade, well now
you can borrow even more against that increased value, or
(19:08):
maybe refinance the existing loan on even better terms. This
cycle effectively turns paper wealth into real, usable capital that
fuels more affet growth, all without ever triggering those painful
income or capital gains taxes. It's a remarkable engine for
wealth creation and liquidity that just keeps feeding itself.
Speaker 2 (19:25):
Which then brings us to the critical final phase of
this whole strategy, and it raises that important question what
actually happens to this carefully built structure and all that
accumulated wealth when the original owner passes away. This is
where we hit the ultimate tax advantage. Phase three die
When the asset owner dies, a crucial and maybe often
(19:45):
misunderstood tax concept kicks in. It's called this step up
in basis. Under current US tax law, the cost basis
essentially the original purchase price for tax purposes of their
inherited shares or assets resets. It steps up to the
fair market value in the day to their death. And this
is where decies potentially of unrealized capital gains just vanish
from a tax perspective.
Speaker 1 (20:06):
Anyway, Okay, let's use that specific example again, the Apple
stock one, because it makes it incredibly clear. Imagine your
grandpa was savvy, bought one million dollars of Apple stock
way back in the nineties, believed in the company early.
Over the next thirty years, Apple becomes this global giant.
Right that stock explodes in value. By the time Grandpa passes,
it's worth a staggering ten million dollars. Now, if Grandpa
had sold that stock while he was alive, he'd owe
(20:28):
capital gains tax on the nine million dollar profit the
ten million dollar value minus his one million dollar original
cost at maybe twenty percent at federal tax plus state taxes,
that's easily one point eight million dollars maybe more lost
to taxes right there. But Grandpa playing the long game
understood by borrow die. She didn't sell, he held on.
When he does, something truly remarkable happens for his errors.
(20:49):
Under current law, when they inherit that apple stock, its
cost basis resets, it steps up to the market value
on his date of death, which is ten million dollars.
So instead of inheriting stock with a one million dollar
dollar basis and this huge nine million dollar tax will
gain baked in, they inherit it with a ten million
dollar basis. Now, if they turn around and sell that
stock the very next day for ten million dollars, they
owe zero dollars in capital gains tax. The entire tax
(21:12):
liability on that nine million dollar appreciation. It just vanished,
wiped clean, gone, like they bought it for ten million
dollars themselves.
Speaker 2 (21:18):
And this incredibly powerful principle applies broadly real estate, private businesses,
other appreciating assets, as long as they're held until death
and passed on correctly. This correctly part often involves sophisticated
estate planning tools like trusts. You mentioned irrevocable trusts. Why
are they key? Well, an irrevocable trust means the person
(21:39):
setting it up to grand tour gives up control over
the assets put inside. They can't just take the back
or easily change the terms. This legal separation usually takes
those assets out of their personal estate for tax purposes,
so when they die, those assets typically aren't subject to
a state taxes, and the step of a basis rule
still applies to the assets within the trust when inherited.
(22:00):
What about those outstanding loans from phase two, the borrowing
against assets? How are they handled? Very Often wealthy individuals
proactively planned for this. They take out large life insurance
policies frequently held inside those same yourrevocable trusts. These policies
are specifically designed so the payout upon death is enough
to completely pay off any outstanding loans secured against their assets.
(22:20):
So the insurance payout clears the debts, often tax free
to the trust itself. The errors then receive the assets clean, unencumbered,
with that lovely new stepped up basis, ready to continue
the cycle if they choose. The whole wealth transfer is smooth,
incredibly tax advantage and precisely engineered for continuity across generations.
Speaker 1 (22:38):
Wow. So the final act die isn't just an ending,
It's really like a brilliant capstone move in a lifetime
of strategic financial planning. It ensures the wealth doesn't just continue,
but flourishes for the next generation without facing the same
kinds of tax hurdles most of us encounter. So, just
to recap the whole cycle, the original owner lives for
decades buying and holding appreciating out assets. They borrow against
(23:01):
them for liquidity, lifestyle, more investments. They pay minimal tax
because they're avoiding income and capital gains triggers. They enjoy
incredible flexibility, and then at the end they pass that
immense wealth down, often completely tax free, with a fresh,
stepped up basis for the errors. No selling needed during life,
minimal interm tax, minimal capital gains tax, and often no
(23:22):
estate tax if planned.
Speaker 6 (23:23):
Right.
Speaker 1 (23:24):
That in a nutshell is the by borrow die strategy.
It's a really stark illustration of how the financial game
is played at the absolute highest levels.
Speaker 2 (23:32):
Absolutely, and when you connect that to the bigger picture,
it really profoundly highlights how our financial system is, in
many ways fundamentally set up to benefit capital over labor.
It creates this powerful, enduring framework for preserving wealth across generations.
It's really a testament to how financial rules can be
leveraged when you understand them deeply and operate in that
(23:52):
different realm, shifting from just earning income to strategically owning
and leveraging assets.
Speaker 1 (23:57):
So what does all this mean for you? Listening at
the end of the day, the game really seems to
boil down to one simple, yet massive distinction. The financial
system just works fundamentally differently for those who own assets
versus those who primarily earn income. It suggests it's not
necessarily about just working harder to earn more salary dollars.
It's more about strategically owning the right kinds of things,
(24:20):
leveraging those assets smartly for liquidity without selling, and meticulously
planning for their long term transfer. That combination allows wealth
to compound, be accessed, and be passed down in ways
that relying solely on income simply can't match.
Speaker 2 (24:33):
Which leads us to, I think a crucial question for
you to reflect on. Knowing all this, how might you
start to shift your own focus even just a little bit,
moving from only thinking about earning if it's thinking about
strategically owning, even on a smaller scale, to maybe navigate
your own financial landscape better. As you think about this
deep dive, maybe consider not just how this extreme wealth
(24:54):
is built and passed on, but also maybe think about
whose interests the current financial systems seem truly designed to serve,
and what might that imply for your own long term
financial strategy. How could understanding this distinction change the way
you view your own economic reality and relationship with money, debt,
and assets.
Speaker 1 (25:13):
Thank you for joining us on this pretty fascinating deep dive.
We really hope you walk away not just with more information,
but maybe with a genuinely new perspective on how wealth
truly operates in the world today. Until next time, keep digging.
Welcome to the deep Dive, where we sift through the sources,
pull out the most important insights, and deliver them to you.
Ready for your mind. Today, we're plunging into a financial
puzzle that probably sounds familiar. You've heard the anecdote, right,
the one about a billionaire not bothering to pick up
one hundred dollars bill if it fell out of their
pocket and landed on the sidewalk. The common wisdom says
(00:20):
it's because in the few seconds it would take to
bend down and retrieve it, they would have already earned
significantly more just by standing still.
Speaker 2 (00:28):
It's an intriguing image, isn't it a classic? And while
that simple story maybe captures a tiny bit of truth,
what's really fascinating, I think is how it hints its
something much deeper, more fundamental truth about how the ultra
wealthy generate and manage their fortunes. It's not just about
the time value of money right then and there. It's
about the very nature of their financial reality, which is
(00:50):
well dramatically different from what most of us experience day today.
Speaker 1 (00:53):
Okay, yeah, let's unpack this. Then. Our mission with this
deep dive is to explore these lesser known mechanisms, you know,
how wealth actually accumulates and gets transferred to the very top.
We're dissecting how the ultra rich navigate financial systems in
ways that really diverge significantly from the average person's experience.
We're trying to go behind the curtain reveal how that
(01:15):
top tier of wealth operates. The material we've gathered it
offers a unique window into these very specific, highly effective strategies.
It's genuinely eye opening stuff, and I think it might
fundamentally shift how you view wealth itself.
Speaker 2 (01:30):
Yeah, and when we connect this to the broader financial landscape,
it becomes really clear how the structure of wealth itself,
not just the sheer amount, right, dictates a completely different
set of rules for financial engagement. For the vast majority
of people, our financial ads revolve around what we earn,
our jobs.
Speaker 3 (01:45):
Our labor.
Speaker 2 (01:46):
But for this super wealthy it's not just a different scale,
it's a completely different game, entirely different rule book exactly.
Speaker 1 (01:52):
For most of us, when we talk about wealth, we're
really talking about income. It's about how much money hits
our bank account from our job, right, that's what we
live on. We work hard, we get a paycheck, maybe
a bonus if we're lucky, maybe a raise. Our whole
financial existence or budgeting, planning for the future. It's often
built around that monthly cash flow. That's stream of income
and society well, it conditions us from pretty young to
(02:15):
see getting a higher salary, a bigger bonus as the
main measure of financial success. We celebrate promotions, we talk
about income brackets. It's the metric we understand because it's
the reality for well almost everyone. It feels like the
only way to build wealth.
Speaker 4 (02:29):
But this immediately brings up a really crucial point. If
traditional income, the kind most people rely on, is tax
so heavily, what's the alternative for those accumulating vast fortunes.
It's the truth that often surprises people I find. But
for the ultra wealthy, that traditional income, as most of
us think of it is often seen as a big problem,
something they actively try to avoid. And the core reason
(02:52):
it's simple aggressive taxation. In the US, someone in the
highest income bracket can lose what up to thirty seven
percent of their earned income just to federal taxes, and
that's before you even factor in state income taxes, which
can be pretty hefty in places like California or New York. Oh,
and payroll taxes too.
Speaker 2 (03:10):
When you add all that up, you could be looking
at well over half your earned income going straight to taxes.
So this is precisely why the wealthiest individuals find ways
to structure their financial lives to avoid or at least
dramatically minimize that kind of traditional, highly taxed income.
Speaker 1 (03:25):
Okay, here's where it gets really interesting and maybe a
bit mind bending for folks. How did these titans of industry,
you know, people running massive companies names everyone knows, how
did they get by on what seemed like incredibly tiny salaries.
It completely flips our understanding of executive pay on its head.
We're talking figures that seem modest even for a mid
level manager, let alone the CEO of some huge corporation
(03:47):
like Elon Musk right famous for taking exactly zero dollars
in pay from Tesler for multiple years, or Warren Buffett,
legendary investor He's kept a base salary of just one
hundred thousand dollars a year for like forty years at
Berkshire Hathaway forty years. Jeff Bezos back when he was
CEO of Amazon, his salary was around eighty thousand a
year and Mark Zuckerberg his base salary at Meta is
(04:09):
literally one dollar, a single dollar. And these aren't just
weird one officer quirks. This is a common strategy among
the very rich. It's illiberate, meticulously planned structure the compensation
to minimize that highly taxable income, which just begs the question, right,
how on earth do they afford their lifestyles, their investments
if not through salaries.
Speaker 5 (04:26):
Right, And to understand that, you really need to shift
your whole perspective. This isn't about a labor based income
model anymore. It's a capital based wealth model. Their wealth
isn't sitting around as liquid cash and checking accounts, you know,
earning peanuts or gathering dust. It's primarily held in equity.
We're talking about shares in the companies they've built or
invested in, big stakes in private businesses, positions and investment funds.
(04:48):
Other appreciating assets could be huge real estate holdings, valuable
ip even like major art collections. The crucial point is
this wealth is locked into assets designed to grow over time,
and fundamentally though those assets aren't taxed as long as
they aren't sold. This really highlights a core aspect of
the tax system. It quietly but profoundly benefits capital over labor.
(05:09):
It's kind of designed to encourage investment, risk taking, accumulating assets.
Not necessarily a flaw maybe, but it definitely creates a
distinct advantage for those whose wealth comes from capital.
Speaker 1 (05:18):
Yeah, and this leads us right to a key concept
accountants called the realization principle. It's a really powerful idea
because it basically dictates that you don't pay tax on
the gains of an asset until you actually sell it,
until those gains are realizing to cash. So if your
investment skyrockets and value, you're richer on paper, sure, but
you don't owe a dime in taxes until you choose
(05:39):
to cash out. Think of it like having a treasure chest. Right,
you keep adding jewels, rare coins, Its value climbs and climes.
The chest gets heavier, way more valuable, But the tax
collector they only care if you actually open it and
start taking stuff out to spend. As long as it
stays closed full of potential value, it's just an unrealized gain.
You owe nothing on it. Consider something to tangible like
(06:00):
your house. Let's say you've bought it for one hundred
thousand dollars twenty years ago. Today it's appraised at one
million dollars. You don't suddenly have nine hundred thousand dollars
sitting in your bank, do you. The value is locked
up in the property. You'd have to sell it to
get that cash. And because you haven't sold it, the
irs isn't knocking on your door demanding taxes just because
the house went up in value on paper. This principle
is absolutely key for the ultra wealthy. The strategy is
(06:22):
often to never sell anything unless they absolutely have to,
because the second they sell, boom, they trigger a potentially
massive tax bill.
Speaker 2 (06:31):
Exactly, this realization principle is truly foundational. It's how wealth snowballs,
often silently and rapidly, without hitting those tax triggers that
most people deal with constantly. It lets their fortunes compound
expand exponentially, largely unburdened by the annual tax hits that
would otherwise chip away at the growth. I mean, for
the average person, every paycheck, every bonus, any traditional income
(06:54):
gets taxed right away, right reducing what's left to save
or invest. But for the ultra wealthy, their main wealth
vehicles their assets can appreciate for decades, even generations, completely
free of tax implications until or unless they're eventually sold.
This means the money they've invested just keeps working for them,
compounding interest on top of interest year after year without
(07:15):
that tax track. It's really the essence of how capital
gets favored in the current financial system. And look, there
are practical reasons for this too. Imagine the chaos if
everyone had to calculate and pay taxes on every tiny
daily wiggle in their stock portfolio value or on their
house value fluctuating. But this administrative necessity billy It invertently
creates this huge advantage for long term wealth accumulation.
Speaker 1 (07:36):
Right, So, while the rich are busy figuring out how
not to sell their appreciating assets, most of us are
dealing with a totally different financial reality. We're constantly grappling
with how to pay off our debts.
Speaker 6 (07:49):
It's such a stark contrast, isn't it Almost poetic in
a way. When most people take out a loan for
a house, a car, even just using a credit card,
they're entering this financial relationship where the terms often feel
well heavily stacked against them. And this isn't just a
small thing. It's a fundamental dynamic that can trap people,
families in this cycle of payments that feels like it
just never ends, like a financial treadmill you can't get off.
Speaker 7 (08:11):
Yeah, And that leads us to a really important question.
Why are the rates for consumer loans so well disproportionately
high compared to other types of lending. It basically boils
down to how banks perceive risk, how they meticulously assess
it for the average borrower. Let's just look at the
numbers for a second to get the scale. The average
US household carries what about one hundred and forty eight
thousand dollars in mortgage debt, part of an almost twelve
(08:33):
point six trillion dollar national total. That's huge, And with
thirty year fixed mortgage raised lately around six point eight
five percent, nearly double what they were just a couple
of years back, this is not easy debt to handle.
Think about a common scenario, say a two hundred and
fifty thousand dollars mortgage at that six point eighty five
percent over thirty years, your monthly payment is roughly sixteen
hundred dollars. Now, if you stick to that schedule for
(08:54):
the full thirty years, you'll actually end up repaying around
five hundred and seventy.
Speaker 8 (08:57):
Six thousand dollars, more than double what you borrowed.
Speaker 2 (08:59):
Innitie.
Speaker 7 (09:00):
And here's the real kicker, the part that exposes the trap.
For the first decade, maybe even longer, almost all of
that payment goes straight to interest. It barely touches the principle.
Speaker 2 (09:08):
You're essentially paying this huge premium just for the privilege
of living in a home you don't truly own yet,
not building equity like most people imagine. And this gets
even worse with other debts. Right credit card rates often
hit eighteen percent, twenty percent, even twenty five percent. They
just strip away incredible value. Auto loans, student loans, they
follow suit, locking people into these long repayment schedules that
(09:30):
just drain their earnings year after year.
Speaker 1 (09:32):
It really is like running on that treadmill where the
ground keeps shifting. You're working so hard, putting in the hours,
but a huge chunk of your earnings isn't really yours.
It's just covering the cost of borrowing money you never
really got to fully benefit from in the first place.
And this is where the double squeeze comes in making
it even tougher. It's not just the high interest rates.
You're forced to make those loan payments with after tax income.
(09:54):
Let's use that mortgage example again. If your annual payment
is say nineteen two hundred dollars, To actually have that
nineteen two hundred dollars after taxes, you need to earn
something like twenty nine five hundred dollars before taxes, assuming
maybe a thirty five percent combined tax bracket. So you're
paying income tax and interests simultaneously on basically the same
pot of money. This double squeeze is exactly why it
(10:17):
feels impossible for many people to escape the rat race.
You take out loans, the payments come from money that's
already been taxed, and then you pay the bank substantial
interests on top of that. It's an incredibly efficient system
for well extracting value, trapping people in a cycle where
they feel like they're just working to stand still.
Speaker 2 (10:32):
And from the bank's viewpoint, this system is really designed
to extract maximum value from those they consider higher risk.
While you're making those hefty payments, the bank ironically sees
themselves as taking basically zero risk on these loans. Why
because they've collateralized the assets simple as that your house,
your car, may be equipment for a small business. If
(10:53):
you miss enough payments, they just take it back. Then
they resell it, often getting back their principle and maybe
even more, which leads to at maybe settling but accurate statement.
In many ways, you don't truly own your home until
that last payment clears the bank does. You're essentially just
renting it from them for potentially decades. This whole mechanism,
while seeming straightforward, is incredibly effective at shifting wealth and
(11:15):
value from working in middle classes towards financial institutions.
Speaker 1 (11:18):
So it really isn't just about how much you earn
on paper, It's about how you hold your money, and crucially,
how much you own outright, free and clear and understanding
this difference leads us perfectly into seeing why the buy
borrowed die strategies even possible for the ultra wealth. The
bank at its core doesn't actually care that much about
your salary figure in isolation. What they truly care about
(11:40):
is the safety of their money. Can they get it back?
Think about it, someone making one hundred and fifty thousand
dollars a year but with no real savings, no significant collateral,
maybe a job history that looks a bit volatile. To
the bank, that person is kind of a walking liability.
You might feel like you're doing okay, but you're a
red flag. In their underwriting models. They check credit score,
(12:01):
debt to intome ratio, employment stability, every detail signaling whether
you'll lively pay or if you'll have to go through
the hassle of repossession. That's why someone earning, say just
forty thousand dollars a year, but who owns their house outright,
has cash reserve, stable assets, they might actually be seen
as more bankable, less risky than someone earning two hundred
thousand dollars but drowning in credit card and student mind it,
(12:22):
and that's why consumer loans like mortgages and credit cards
have such high interest rates. You, the borrower, are essentially
paying a premium for the bank's perceived risk and lending
to you right.
Speaker 2 (12:33):
And this brings us to the absolutely crucial distinction that
makes the whole by borrow die strategy work. The average
person borrows a huge amount relative to what they actually own.
That makes them high risks to the bank, trapping them
in those long repayment cycles. The rich. However, they borrow
a comparatively tiny amount relative to the immense value of
the assets they already possess. This makes them inherently low risk,
(12:56):
and it's sophisticated private banks they absolutely love low risk
court these clients. It's a completely different power dynamic.
Speaker 1 (13:02):
Yeah, this is where the financial game just fundamentally shifts.
It's a strategy that honestly almost sounds too good to
be true when you first hear it, and it starts
with what you own, not what you earn through your job.
The buy, borrow die strategy basically unfolds in three phases. First,
you acquire substantial assets that appreciate that grow in value
over time. Then, and this is the key, you don't
(13:24):
sell them. Instead, you strategically borrow money against those assets.
This gives you liquid cash to spend, invest, fund your life, whatever,
all without figuring taxes. And finally, when you die, everything
kind of resets for the next generation, often with incredible
tax advantages built in. It's a really sophisticated, multi generational
way to build and transfer wealth. Let's break down each
(13:45):
phase properly.
Speaker 3 (13:46):
Okay, Phase one, buy This is the absolute bedrock of
the whole thing. It really represents a fundamental shift in
mindset away from just chasing income towards strategically accumulating capital.
This is what separates true wealth accumulation from earning a living.
You know, the wealthy aren't focused on stacking cash and
bank accounts that loses value to inflation and gets taxed
to veteran's interest. Instead, they acquire appreciating assets, things expected
(14:10):
to grow in value, and this covers a huge range.
Big stakes in public stocks, large portfolios of commercial or
residential real estate ownership, and private businesses. They built or
invested in valuable intellectual property, sometimes even rare art or
huge tracts of farmland. The core goal isn't quick flips
for short term profit that would trigger immediate capital gains taxes. No,
the idea is to hold these assets for the long haul, decades,
(14:33):
ideally letting their value compound year after year. This is
exactly why, like we mentioned, major CEOs Musk Zuckerberg are
paid almost entirely in stock or options. Their wealth isn't
sitting in a checking account getting taxed. It's compounding inside
these assets as the.
Speaker 8 (14:47):
Companies grow, and crucially, as long as those assets aren't
sold they're not taxed. That's the unrealized gains principle.
Speaker 2 (14:53):
Again.
Speaker 8 (14:53):
If your stock portfolio grows from one million dollars to
five million dollars, that four million dollar gain no taxes
do unless you sell, You're richer on paper. But the
irs waits same for real estate. Buy a property for
two million dollars. Ten years later, it's worth six million
dollars unless you sell or refinance. No tax on that
four million dollar appreciation. This fundamental principle allows wealth to
just snowball exponentially without the constant friction of taxes swelling
(15:15):
it down. It's a powerful engine.
Speaker 1 (15:16):
Okay, But owning all these appreciating assets, while great for
building wealth on paper, doesn't actually pay the bills, right,
It doesn't fund the jet or pay the staff. So
if you're worth hundreds of millions in assets, but you
absolutely don't want to sell because of the huge tax hit,
how do you actually get cash to live on or
invest more? And this brings us neatly to phase two
borrow hmm. And this is where it gets really interesting
(15:40):
because when you've got a massive diversified portfolio, private banks
aren't just willing to help, they are eager to give
you liquidity. Let's say you own one hundred million dollars
in a mix of stocks in prime real estate. You
don't just walk into your local bank branch. You go
to a private bank think Bolden Sex Private Wealth, JP,
Morgan private bank, maybe a big Swiss bank. You tell them, look,
I need cash for investments, life style, whatever, but I'm
(16:01):
not selling my underlying assets. The private banker, who understands
your net worth inside out, will likely say, okay, let's
set up a credit facility for you. This isn't your
average loan. They'll carefully evaluate all your holding stocks, bonds,
real estate, maybe even that art collection, and they'll offer
you a substantial line of credit based on what's called
a loan to value or LTV ratio. These LTVs are
(16:23):
usually conservative for the bank, maybe fifty percent for liquid stocks,
sixty seventy percent for stable real estate, perhaps hire for
really solid stuff. So with a one hundred million dollars
in real estate, the bank might happily lend you sixty
or seventy million dollars at a very low interest rate,
secured directly by those appreciating assets. And the free money
in aspect here is pretty incredible for the borrower, absolutely
(16:44):
no capital gains tax is triggered because nothing was sold.
You keep owning your appreciating assets, and you get immediate
access to huge amounts of cash. It's honestly the closest
thing the financial system offers to literally free money for
the ultra wealthy.
Speaker 2 (16:56):
Yeah, this is a critical point. The financial rules most
people live by, they just don't apply here in the
same way. A regular person borrowing money faces high interest,
mandatory principle payments each month and has to use income
that's already been taxed before paying the debt. But for
the ultra wealthy, the system sees almost no risk. When
you already own hundreds of millions or billions in assets,
(17:17):
you are the collateral. Your portfolio is the collateral. You're
not just borrowing from the bank, You're kind of partnering
with them. They're leveraging your assets to generate revenue for themselves.
The bank is absolutely thrilled to give you a loan
at a relatively tiny interest rate, because even say two
percent to four percent annually on hundreds of millions or billions,
that's a massive, consistent, low risk income stream for them. Plus,
(17:39):
these wealthy clients usually use the same private bank for
everything else too, right, investment management and state planning, trust services,
family office stuff. It's a whole relationship. This package deal
is precisely why the rich pay less interest, avoid big
tax events by not selling, and get unparalleled access to
credit that turns their paper wealth into usable cash, all
without trick tax liabilities. It's symbiotic, sure, but clearly structured
(18:03):
to benefit the asset holder and the bank.
Speaker 1 (18:05):
Let's make that even more concrete. Say you use this
kind of setup to take out a fifty million dollar
loan secured by your assets at a really good rate,
maybe two point five percent annual interest. How might someone
actually use that cash? Well, maybe five million dollars go
straight to lifestyle stuff, maintaining multiple homes, running the private jet,
paying for staff, maybe significant philanthropy. Another big chunk, say
(18:26):
twenty million dollars could be strategically plowed into new ventures,
high growth investment funds, maybe acquiring more private businesses to
further expand and diversify the portfolio. And the rest maybe
gets rolled right back into buying more appreciating assets, just
strengthening the foundation of the wealth. Now, the annual interest
payment on that fifty million dollar loan at two point
five percent, that's one point two five million dollars a year.
(18:48):
But here's another key detail. Depending on how the loan
is structured and what the funds are used for, that
interest payment might even be tax deductible against other investment income,
further reducing the actual cash cost, and all the while
your original assets they just keep growing. Background. If that
initial one hundred million dollar portfolio grows to one hundred
and fifty million dollars over the next decade, well now
you can borrow even more against that increased value, or
(19:08):
maybe refinance the existing loan on even better terms. This
cycle effectively turns paper wealth into real, usable capital that
fuels more affet growth, all without ever triggering those painful
income or capital gains taxes. It's a remarkable engine for
wealth creation and liquidity that just keeps feeding itself.
Speaker 2 (19:25):
Which then brings us to the critical final phase of
this whole strategy, and it raises that important question what
actually happens to this carefully built structure and all that
accumulated wealth when the original owner passes away. This is
where we hit the ultimate tax advantage. Phase three die
When the asset owner dies, a crucial and maybe often
(19:45):
misunderstood tax concept kicks in. It's called this step up
in basis. Under current US tax law, the cost basis
essentially the original purchase price for tax purposes of their
inherited shares or assets resets. It steps up to the
fair market value in the day to their death. And this
is where decies potentially of unrealized capital gains just vanish
from a tax perspective.
Speaker 1 (20:06):
Anyway, Okay, let's use that specific example again, the Apple
stock one, because it makes it incredibly clear. Imagine your
grandpa was savvy, bought one million dollars of Apple stock
way back in the nineties, believed in the company early.
Over the next thirty years, Apple becomes this global giant.
Right that stock explodes in value. By the time Grandpa passes,
it's worth a staggering ten million dollars. Now, if Grandpa
had sold that stock while he was alive, he'd owe
(20:28):
capital gains tax on the nine million dollar profit the
ten million dollar value minus his one million dollar original
cost at maybe twenty percent at federal tax plus state taxes,
that's easily one point eight million dollars maybe more lost
to taxes right there. But Grandpa playing the long game
understood by borrow die. She didn't sell, he held on.
When he does, something truly remarkable happens for his errors.
(20:49):
Under current law, when they inherit that apple stock, its
cost basis resets, it steps up to the market value
on his date of death, which is ten million dollars.
So instead of inheriting stock with a one million dollar
dollar basis and this huge nine million dollar tax will
gain baked in, they inherit it with a ten million
dollar basis. Now, if they turn around and sell that
stock the very next day for ten million dollars, they
owe zero dollars in capital gains tax. The entire tax
(21:12):
liability on that nine million dollar appreciation. It just vanished,
wiped clean, gone, like they bought it for ten million
dollars themselves.
Speaker 2 (21:18):
And this incredibly powerful principle applies broadly real estate, private businesses,
other appreciating assets, as long as they're held until death
and passed on correctly. This correctly part often involves sophisticated
estate planning tools like trusts. You mentioned irrevocable trusts. Why
are they key? Well, an irrevocable trust means the person
(21:39):
setting it up to grand tour gives up control over
the assets put inside. They can't just take the back
or easily change the terms. This legal separation usually takes
those assets out of their personal estate for tax purposes,
so when they die, those assets typically aren't subject to
a state taxes, and the step of a basis rule
still applies to the assets within the trust when inherited.
(22:00):
What about those outstanding loans from phase two, the borrowing
against assets? How are they handled? Very Often wealthy individuals
proactively planned for this. They take out large life insurance
policies frequently held inside those same yourrevocable trusts. These policies
are specifically designed so the payout upon death is enough
to completely pay off any outstanding loans secured against their assets.
(22:20):
So the insurance payout clears the debts, often tax free
to the trust itself. The errors then receive the assets clean, unencumbered,
with that lovely new stepped up basis, ready to continue
the cycle if they choose. The whole wealth transfer is smooth,
incredibly tax advantage and precisely engineered for continuity across generations.
Speaker 1 (22:38):
Wow. So the final act die isn't just an ending,
It's really like a brilliant capstone move in a lifetime
of strategic financial planning. It ensures the wealth doesn't just continue,
but flourishes for the next generation without facing the same
kinds of tax hurdles most of us encounter. So, just
to recap the whole cycle, the original owner lives for
decades buying and holding appreciating out assets. They borrow against
(23:01):
them for liquidity, lifestyle, more investments. They pay minimal tax
because they're avoiding income and capital gains triggers. They enjoy
incredible flexibility, and then at the end they pass that
immense wealth down, often completely tax free, with a fresh,
stepped up basis for the errors. No selling needed during life,
minimal interm tax, minimal capital gains tax, and often no
(23:22):
estate tax if planned.
Speaker 6 (23:23):
Right.
Speaker 1 (23:24):
That in a nutshell is the by borrow die strategy.
It's a really stark illustration of how the financial game
is played at the absolute highest levels.
Speaker 2 (23:32):
Absolutely, and when you connect that to the bigger picture,
it really profoundly highlights how our financial system is, in
many ways fundamentally set up to benefit capital over labor.
It creates this powerful, enduring framework for preserving wealth across generations.
It's really a testament to how financial rules can be
leveraged when you understand them deeply and operate in that
(23:52):
different realm, shifting from just earning income to strategically owning
and leveraging assets.
Speaker 1 (23:57):
So what does all this mean for you? Listening at
the end of the day, the game really seems to
boil down to one simple, yet massive distinction. The financial
system just works fundamentally differently for those who own assets
versus those who primarily earn income. It suggests it's not
necessarily about just working harder to earn more salary dollars.
It's more about strategically owning the right kinds of things,
(24:20):
leveraging those assets smartly for liquidity without selling, and meticulously
planning for their long term transfer. That combination allows wealth
to compound, be accessed, and be passed down in ways
that relying solely on income simply can't match.
Speaker 2 (24:33):
Which leads us to, I think a crucial question for
you to reflect on. Knowing all this, how might you
start to shift your own focus even just a little bit,
moving from only thinking about earning if it's thinking about
strategically owning, even on a smaller scale, to maybe navigate
your own financial landscape better. As you think about this
deep dive, maybe consider not just how this extreme wealth
(24:54):
is built and passed on, but also maybe think about
whose interests the current financial systems seem truly designed to serve,
and what might that imply for your own long term
financial strategy. How could understanding this distinction change the way
you view your own economic reality and relationship with money, debt,
and assets.
Speaker 1 (25:13):
Thank you for joining us on this pretty fascinating deep dive.
We really hope you walk away not just with more information,
but maybe with a genuinely new perspective on how wealth
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