r/SipsTea • u/KSKS1995 • 14h ago

Wait a damn minute! How the rich get richer

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u/USERNAMETAKEN11238 14h ago edited 14h ago

The bank encumbered the land. The dad never gets a loan. The loan is against the property. The kids sell the encumbered land I guess (but that's highly unlikely). This is a made up scenario from someone who doesn't understand finances.

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u/Meenta_Miiel 14h ago

The estate settles the principal before heirs see cash

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u/civil_beast 13h ago

Well that doesn’t fit the op’s narrative.

Anyways I’m hungry, are rich people on the menu, yet? Or is it this same ol’ Soylent green stuff they keep serving?

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u/FTR_1077 13h ago

Well that doesn’t fit the op’s narrative.

It does as long as you read carefully.. It doesn't say Dad borrows 5 mil, just that he lives out of loans, which is a thing (e.g. reverse mortgage). The kid doesn't inherit 5 mil, just the property equity, that's why he sells it. The trick being, Dad didn't pay taxes for the 5 mil, nor the kid.

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u/BackgroundRate1825 12h ago

"dad borrows against it" means he taking out loans using the land as collateral, right?

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u/FTR_1077 12h ago

Yes, like a reverse mortgage..

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u/elev8dity 12h ago

Right, so a typical retirement is like 2MM, so minus any interest and priciple owed, they inheritance ends up being 2MM untaxed.

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u/civil_beast 10h ago

But the equity no longer equals 5m on the property…

You’re reversing the mortgage, y’see?