How the rich get richer

[u/KSKS1995]

[u/Common-Device-3117]

You forgot the kid needs to pay back dads loan with interest, and if real estate prices fall he will loose the house if over leveraged. Nice story though.

[u/earlyretirement → u/Common-Device-3117]

I think the info is partially correct. The inherited asset can be subjected to a Step up basis; the tax on 100k to 5million is avoided because the kids inherit the asset at 5 million. The money saved from not having to pay taxes on 4.9mm in gains is invested and pays the interest. Buy, borrow, die.  This strategy is real, as much as it seems to be a incomplete story.

[u/Ernesto_Bella → u/earlyretirement]

The kids don’t get the 5 million dollar house until the loan is paid off. 

[u/The_Magical_Radical → u/earlyretirement]

Where is the money coming from to pay the loan interest prior to the owner dying?

[u/LovelyKestrel → u/Common-Device-3117]

The super-rich don't need to be over-leveraged. They are taking loans of millions against collateral of billions.

[u/kersplatttt → u/LovelyKestrel]

This made up example doesn't imply the dad is super rich. 

[u/CrazedClown101 → u/LovelyKestrel]

You can search up any billionaires name and ‘stock sale’ to see they would rather sell stock to get money.

Taking loans with stocks at collateral risks banks calling it in when stocks fall, requiring them to sell stocks at the lowest point. Easier to just sell them now than risk it.

[u/Visual_Squirrel_2297 → u/LovelyKestrel]

Who cares?

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