Master the ‘Buy, Borrow, Die’ Wealth Strategy for Generational Prosperity!

The Buy, Borrow, Die – Wealth Transfer Tax Strategy.

We know that Taxes will be changing according to this tax prophecies summary post I made. https://www.youtube.com/post/UgkxVcPLc3cT3GycJfflzSX_9mZoGRQVyTu5

However, we don’t know which taxes will change. Trump may eliminate income taxes, but he may be forced to keep the capital gains taxes around. The millionaires and billionaires don’t work, so they don’t pay income taxes. But they do have investments and unless they use the strategy below, they do have to pay capital gains taxes. So if Trump eliminates capital gains tax, that would be a huge hit to the government revenue. So the below is still worth reading 🙂

Did you know that the Ultra-Rich often don’t pay taxes on their Wealth? These people have millions and billions of dollars in the stock market, and yet, don’t pay any taxes. The secret is to NEVER SELL your Investments, but to borrow against them. And this is the basics of the Buy, Borrow, Die strategy. When you sell, you owe capital gains tax. But what if you never sold your stocks – then you would owe zero capital gains tax.

The super rich take out asset backed (collateralized) loans from the bank, at a very low interest rate. As an example, let’s pretend you have 100 million dollars invested in stocks. Instead of selling them, you take out a $1 million dollar loan at 1% to 3% interest. Your stocks earn you between 8% and 12% annually. The 3% interest you pay is small in comparison to the gains you make. And so your $1 million gives you enough money to live on lavishly. And year after year you keep taking out more loans, while making minimum payments. This means you take out loans for the rest of your life. Dave Ramsey would probably have a heart attack reading this. Lol.

Here are some use cases for this strategy:

Debt Consolidation (credit cards), Buying Cars/Planes/Motorcycles, Shopping, Daily expenses. So let’s say you have $50,000 in credit card debt. If you sell your crypto, you will most likely owe at least 20% capital gains tax. But what if instead, you sent your $50,000 worth of crypto to a Lending Platform like Nexo, and borrowed cash from them. They would write a check and send it to your bank. Which is another benefit. Your bank would probably have less concerns with a loan you received from Nexo than a crypto exchange transfer. Also since this is a loan, there are no taxes that you owe.

Here are a few short videos I found that do a great job explaining how this no tax strategy works:

https://youtu.be/8pBPZMUcsh0
Buy, Borrow, Die: How America’s Ultrawealthy Stay That Way
ProPublica
Jun 8, 2021

0:18 – Average people need income to pay for basics like housing and food. But the ultrawealthy don’t. They can just live on borrowed cash.

1:05 – the ultrawealthy use loan money to fund their lifestyles. That’s how a billionaire can live the most luxurious life imaginable, while reporting little to no taxable income.

1:19 – When they die… their heirs can inherit stocks and other assets tax-free.

https://youtu.be/E9800biaD1A
How To Use The Buy Borrow Die Strategy To Build Wealth And Pay ZERO Taxes
Toby Mathis Esq | Tax Planning & Asset Protection
Oct 29, 2024

6:49 – let’s say I buy a house. I’m just going to use the example of $500,000. Over the years, I borrow $1 million, against that house. And then I die. And that house is worth $2 million. And my heirs sell it. What’s the tax bill? The tax bill is zero. because the basis is now $2 million. If I sell it for 2 million, I pay back my million dollar loan, and I still have $1 million in my pocket. And I paid zero taxes. Works with stocks too.

7:43 – So let’s just say that I have half a million dollars of stock. It goes up in value over the years. I use it to get a line of credit, and I borrow $1 million against that stock. And then when I pass away, those stocks are worth $2 million. So I sell them and pay off the million dollar loan, which you might have to do. Maybe not. You might be able to just keep rolling it on, just keep carrying it on. But worst case scenario, I’m left with $1 million tax free. Remember, I bought it for half a million, I used a million, and now I have a million. So I’ve literally used $2 million tax free. That’s why the wealthy do this.

14:04 – And that’s what the wealthy do, is they compound it. They use it over and over again with the same strategy in mind, which is sell nothing, let things appreciate, borrow against that and live off of those proceeds because they’re tax free. So it’s like getting a 30% return depending on where you live. It’s going to be somewhere between probably 15% and 30% return on all your money because you avoided the tax on it.

14:36 – And then the other big benefit is when I pass away, all sins are forgiven, right? I don’t have to worry. My basis is now stepped up. My family could sell those assets if they need to, to pay off some of the loans that I used to live off of, and nobody pays tax.

Where to get an asset backed loan?

When you search online you will find that most large stock brokerages like Fidelity or Charles Schwab offer asset backed loans. There are also crypto platforms like Nexo out there, as well as crypto exchanges such as Crypto com that provide crypto loans. In general they all have a term called LTV – Loan to Value. They want to make sure they protect themselves in case your investment drops in price. So they often ask for double the amount you want to borrow. So if you want to borrow $50,000 they ask for $100,000 in collateral. If something happens and your $100,000 investment starts dropping in price, as it reaches $50,000, the platform will automatically sell it to cover your outstanding loan. This is very dangerous when we have flash crashes. One way to avoid this risk, is by using Gold or crypto stablecoins (USDC) or Gold (PAXG). These should be pretty stable.

As of 12/7/24, on Nexo, the LTV for PAXG is 70%. This means if you would deposit $100,000 worth of crypto, you will receive a loan check for 70%, which is $70,000 USD sent to your bank. I listed additional terms for Nexo, below. They have different interest rates based on different membership tiers. If you are Platinum tier member, you get better interest rates – as low as 2.9%. To get that tier, you have to buy and hold a certain amount of Nexo crypto tokens.

Below that, I also included some information for borrowing against stocks at Fidelity. The more you borrow, the lower the interest rate. If you borrow $1 million dollars or more, the interest rate is only 8.5%. And if you think about credit cards that are 20% to 30%, it makes sense to take a loan at 8.5%. Also, often these loans have variable interest rate. So if the US interest rates come down, these loan rates will also decrease.

NEXO

https://nexo.com/borrow

https://support.nexo.com/article/what-loan-to-value-ltv-i-can-get-on-my-assets
LTV of a specific asset essentially means the maximum loan amount that can be borrowed with the asset.
Example: LTV of BTC = 50% (i.e. you can borrow up to 50% of its value)

Loan-to-Value (LTV) Rates (as of 12/17/24):
PAXG (physical gold backed crypto) – 70%
USDC (Stablecoin) – 90%
USDT (Stablecoin) – 90%
XRP – 30%
BTC – 50%
ETH – 50%

https://support.nexo.com/article/nexo-loans-faq

6. What is the interest rate on my loan
   The loan interest rate depends on your Loyalty tier, which itself is determined by the ratio of NEXO Tokens against the rest of your portfolio balance:
   Base (No NEXO Tokens are needed) – 18.9%.
   Silver (Ratio of NEXO Tokens against the rest of your portfolio must be at least 1%​​​​​​) – 17.9%.
   Gold (Ratio of NEXO Tokens against the rest of your portfolio must be at least 5%) – 13.9%.
   Platinum (Ratio of NEXO Tokens against the rest of your portfolio must be at least 10%) – 10.9%.
7. How can I get a discount on the interest rate
   Thanks to our Low-Cost Credit Lines, you can benefit from reduced annual loan rates in the Platinum and Gold Loyalty tiers, respectively, as long as the loan-to-value (LTV) ratio in your Credit Line Wallet remains below 20%.

Platinum:
LTV below 20%: 2.9%
LTV above 20%: 10.9%

Gold:
LTV below 20%: 5.9%
LTV above 20%: 13.9%

8. Do Nexo loans have a maturity date
   The standard maturity of a Nexo loan is one year. However, if you do not repay it by then, the loan will be automatically extended for another year (the number of such extensions shall be unlimited).

Example: Your Credit Line wallet LTV is below 20%, and you are in the Platinum tier, so your loan rate is 2.9%.

https://support.nexo.com/article/nexo-loyalty-program-explained

https://support.nexo.com/article/low-cost-credit-lines-explained

Fidelity

https://www.fidelity.com/learning-center/trading-investing/trading/margin-borrowing
You can use securities you own as collateral to borrow money on margin. Money borrowed on margin can be used for whatever purpose you like—from purchasing additional securities to funding a home improvement project and paying for a car.

https://www.fidelity.com/trading/margin-loans/margin-rates
Fidelity Margin loan interest rates. The interest rate is variable based on a tiered schedule which is determined by the size of the margin loan. The higher your balance, the lower the rate you’re charged.

Debit balance Margin interest rate
$1 million + 8.50% (3.075% below base rate)
$500,000–$999,999 8.75% (2.825% below base rate)
$250,000–$499,999 11.075% (0.500% below base rate)
$100,000–$249,999 11.325% (0.250% below base rate)
$50,000–$99,999 11.375% (0.200% below base rate)
$25,000–$49,999 12.325% (0.750% above base rate)
$0–$24,999 12.825% (1.250% above base rate)
8.50% rate available for debit balances over $1M.
Fidelity’s current base margin rate, effective since November 8, 2024, is 11.575%.

https://archive.ph/nsN0R
1/1/25
How to buy a home with a crypto-backed loan
Discover platforms offering crypto-backed mortgages, allowing you to use digital assets like BTC and ETH to finance real estate purchases without selling your holdings.

Where can you leverage your crypto assets for real estate financing?
Several platforms already offer crypto-backed mortgages, allowing you to leverage your digital assets to purchase real estate. Here are some options:

Nexo: Nexo provides crypto-backed loans compatible with over 40 different currencies. Borrowers can receive quick approvals and flexible repayment plans, making it a viable option for those looking to finance real estate using their crypto holdings.

Ledn: Ledn offers Bitcoin-backed mortgages, allowing clients to use their BTC holdings as collateral to secure loans for real estate purchases. This service is designed to help crypto investors diversify into property without selling their digital assets.

Salt Lending: Salt Lending facilitates crypto-backed loans, including options for real estate financing. By using your crypto assets as collateral, you can access funds for property purchases while retaining ownership of your digital investments.

A strategy like this should only be implemented under supervision of a tax/investment professional. here is an example i mentioned before about setting up Trusts to protect your wealth:
WordPress: https://propheticmoney.com/reduce-wealth-transfer-taxes-with-a-charitable-remainder-trust-crt/
YT: https://www.youtube.com/post/UgkxMtzk8O_fgobVRym9DQXBeCjG7WdUFGh2