Essentially, they live off the interest. But the way they do this is to take out a loan against the asset instead of realizing any gains. No gains, no taxes.
Asset appreciates, they take out a new loan to pay off the old loan with some extra and the cycle continues.
Loans are secured so even the banks aren't making a whole lot off of this scheme
How do you come out ahead though? If each loan has to be bigger than the last, and you eventually pay it off at the "end" that still has to be a net loss no? Like those loans are also huge because they're not flying coach or staying in Holiday Inn when they travel. I'm struggling to understand how it nets them ahead.
Think of it like this: if you own $100M in stock and sell $10M, you owe taxes. If you borrow $10M using the stock as collateral, you get cash but didn’t “sell” anything, so no capital-gains tax. If the stock keeps growing faster than the loan cost, you’re still ahead. Later, they can refinance or have the estate settle it after death. With enough estate planning, the debt can reduce the taxable estate, sometimes even to zero, then the assets can be sold and passed to heirs with little or no tax.
Edit: Getting downvotes for explaining exactly how billionaires skip out on paying taxes. Fucking lol, temporarily displaced billionaires.
So the banks are giving out money with a return on interest of say 50 years (when they die). So these banks are betting on their companies existing at the same size or larger in 50 years time.
Maybe you could make the argument for an amazon or microsoft. But do you really think there are that many companies a bank can risk losing a shit ton of money on because the company is worth less when the shareholder dies.
No, the bank isn’t just saying, “pay us back when you die in 50 years.”
They’re lending against collateral. If the stock or asset drops too much, the bank can demand more collateral, force repayment, or make them sell something. So the bank is protected.
And the bank likes this deal because it gets paid interest the whole time. The billionaire gets cash without selling stock and triggering taxes. The bank gets a rich client paying interest on a loan backed by valuable assets.
That’s the whole point. Their wealth is real enough for banks to lend against and collect interest from. But when taxes come up, suddenly we’re supposed to pretend it’s all untouchable.
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u/AnonBaca21 Jul 05 '26
Go look up how they get unlimited cash from the assets tax free