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I will never have this kind of money. It is still interesting to me from the perspective of understanding whether there is validity to claims that the rich are/

by yojo 2y ago

I will never have this kind of money. It is still interesting to me from the perspective of understanding whether there is validity to claims that the rich are/aren’t paying their fair share. Assuming the write-up is correct, it provides substantial evidence that the ultra-wealthy are capable of sheltering gains in ways that I am not. As to the risk issue, I see no reason why the “asset” couldn’t be a combination of multiple assets, or an asset like an index ETF that tracks a diversified bundle of things. E.g. a substantial portion of my net-worth is tied up in a Vanguard target retirement fund (one asset). Most financial advisors consider this fine from a risk perspective.

twoodfin 2y ago
It’s actually much easier for you to “shelter gains” in this way: You don’t have to worry about estate taxation. Anyone can borrow against assets (securities and otherwise) they own. Home equity loans are big business, and securities-backed loans aren’t obscure below $300M. Frankly, it’s the “but the ultra-rich get special low-interest loans” bit that’s the most unbelievable part of the write up. But it’s also the keystone: Without these magic loans, it’s just standard estate planning (which is all about tradeoffs of taxes vs. control) + a likely suboptimal investment strategy.
- Terr_ 2y ago
  > It’s actually much easier for you to “shelter gains” in this way: You don’t have to worry about estate taxation. *shakes fist* "Damn you, Lucky Ducky!" https://www.gocomics.com/tomthedancingbug/2016/10/28 https://www.gocomics.com/tomthedancingbug/2016/10/28
- chii 2y ago
  > “but the ultra-rich get special low-interest loans” If you are rich, and is not borrowing at high LVR, it means the lender has a reasonable belief that you can pay back the loan (and the collateral is also good). The lender _can_ give you a lower interest rate, due to the loan market being pretty competitive, because they take on less default risk compared to a non-rich person taking the same loan. it's not gonna be a massive difference, but for large sums, probably does make a difference worth doing.

by yojo 2y ago

twoodfin 2y ago

It’s actually much easier for you to “shelter gains” in this way: You don’t have to worry about estate taxation. Anyone can borrow against assets (securities and otherwise) they own. Home equity loans are big business, and securities-backed loans aren’t obscure below $300M. Frankly, it’s the “but the ultra-rich get special low-interest loans” bit that’s the most unbelievable part of the write up. But it’s also the keystone: Without these magic loans, it’s just standard estate planning (which is all about tradeoffs of taxes vs. control) + a likely suboptimal investment strategy.

Terr_ 2y ago
> It’s actually much easier for you to “shelter gains” in this way: You don’t have to worry about estate taxation. *shakes fist* "Damn you, Lucky Ducky!" https://www.gocomics.com/tomthedancingbug/2016/10/28 https://www.gocomics.com/tomthedancingbug/2016/10/28
chii 2y ago
> “but the ultra-rich get special low-interest loans” If you are rich, and is not borrowing at high LVR, it means the lender has a reasonable belief that you can pay back the loan (and the collateral is also good). The lender _can_ give you a lower interest rate, due to the loan market being pretty competitive, because they take on less default risk compared to a non-rich person taking the same loan. it's not gonna be a massive difference, but for large sums, probably does make a difference worth doing.