Go get a calculator - if you took out a loan and had the interest set a the minimum of the AFR, what would it compound to in 30 years? It would obviously be much higher than just selling stock and paying capital gains on it.
The ultra rich do take out loans, and these loans do get repaid, and that money has to come from somewhere. Go google something like billionaire stock sales to see examples - if they all could just say, "Thanks for the zero percent interest loan! I'll pay you back in 30 years in my estate!" - I think they would have.
I suspect you are simplifying what's happening quite a bit, not sure if it's intentional or otherwise. But wouldn't the more likely scenario be that you borrow 100m with a 10 year draw at x% interest and then at the end of the 10 years you do a stock sale (some taxes paid), pay the interest (interest is generally non-taxable) and then take out a new loan for 500m based on your much larger portfolio, and finally claim significant losses against some other asset (regain your actual stock sale taxes losses "oh no my art lost value!")? Repeat ad nauseam until you're dead.
Obviously every person tries to avoid taxes - you don’t have to be rich do do that - but the idea that there are magic banks that loan money and don’t mind waiting decades to get their money back is some kind of weird propaganda.
>...I suspect you are simplifying what's happening quite a bit
People keep saying “buy, borrow, die” as if it is really that simple - like it is that one simple trick that banks and the IRS hate.
>...But wouldn't the more likely scenario be that you borrow 100m with a 10 year draw at x% interest and then at the end of the 10 years you do a stock sale (some taxes paid), pay the interest (interest is generally non-taxable) ...
Your scenario is not “buy, borrow, die” as a core concept of that meme is you take advantage of the stepped-up basis upon death and the estate pays the interest. With your scenario the person imght have an interest payment of 50 million + the original 100 million, so now they have to sell enough stock to pay the 150 million and the 23-36% taxes on the gain (depending on the state they are located in - obviously different for countries other than the USA). That isn’t estate planning, that is hoping your stocks really go up and that the loan doesn’t come due in a downturn like 2008.
>"oh no my art lost value!"
That trick where for example, where someone would donate some painting to a museum and pay someone to say the donation is with N million, might have worked at some point in time, but that kind of thing is pretty much guaranteed to get an audit these days from what I have read and I would be very careful trying to do that.
A variant of the "buy, borrow, die" which some claim is done is basically that a bank essentially becomes a minority shareholder of the estate for giving the money. Though I recall one CPA who dealt in this area replying that none of the family offices he knew would likely be interested in this approach - people like Goldman Sachs are not your friends.
