Buy, Borrow, Die Paradox: How The Rich Get Richer Using Debt

Small Business Tax Savings Podcast

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What if you could grow your wealth, avoid taxes, and pass on your assets to your heirs without capital gains?

In this episode, Mike discusses the *Buy, Borrow, Die* strategy—a powerful tax avoidance method used by the wealthy to preserve and grow wealth. By buying appreciating assets, borrowing against them tax-free, and passing them on to heirs with a stepped-up basis, individuals can minimize taxes on both capital gains and inherited wealth. Mike breaks down how this strategy can apply to anyone with appreciating assets and provides a step-by-step guide on how to implement it effectively.

Discover the Buy, Borrow, Die strategy and how it can work for you!

[00:00 - 01:14] Introduction to the Buy, Borrow, Die Strategy

• Mike introduces the concept of how the wealthy use this strategy to appear less wealthy and minimize taxes.
• He highlights the focus on buying assets, borrowing against them, and passing them on tax-efficiently.

[01:14 - 02:35] Tax Concepts: Step-Up in Basis and Borrowing Against Assets

• Explanation of the step-up in basis: heirs inherit assets at market value, avoiding capital gains.
• Borrowing against assets like stocks or real estate doesn’t count as taxable income.

[02:35 - 04:36] Example: Stock Appreciation, Tax Efficiency, Real Estate Borrowing, and Inheritance

• Mike illustrates how borrowing against appreciated stocks allows tax-free access to funds.
• The example shows how holding assets until death can help heirs avoid capital gains.
• Mike shares an example of real estate borrowing and how it affects taxes for heirs.
• He emphasizes holding onto assets until death to maximize tax advantages.

[04:36 - 07:40] Not Just for the Ultra-Wealthy

• Mike explains that anyone with appreciating assets can utilize this strategy, not just billionaires.
• He details how it can apply to people with real estate, stocks, and businesses.
• The steps include acquiring appreciating assets, borrowing wisely, and planning for a tax-efficient exit.
• Mike highlights the importance of planning for your heirs and consulting financial advisors.

[07:40 - 09:32] Final Thoughts: How to Maximize This Strategy

• Mike encourages strategic planning for asset management and borrowing to avoid unnecessary capital gains.
• Mike suggests working with financial advisors for long-term wealth building and minimizing tax burdens.

Direct Quotes:

“The truth is that most billionaires are not paying more in taxes as their wealth skyrockets, like the average person does.” - Mike Jesowshek, CPA

“Borrowing against assets like stocks or real estate doesn’t count as taxable income. That loan money is not income to you, so it’s also not taxable.” - Mike Jesowshek, CP

“In a perfect world, you hold onto appreciating assets until death, ensuring the most tax-efficient exit for your heirs.” - Mike Jesowshek, CP

"Use borrowed funds wisely—invest in other things, grow your wealth, and maximize the opportunity." - Mike Jesowshek, CP

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Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast

Join TaxElm: https://taxelm.com/

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