People that wealthy don't actually sell their assets so as to be subject to capital gains: they use them as collateral for low-interest rate equity lines of credit. Then when they die the cost basis for the assets gets reset, and the estate sells assets at the reset cost basis to settle the loan.
Not much different than getting a mortgage on a house than taking out a HELOC on the equity when the value goes up. It works until it doesn't, as 2008 showed us.
A lot of what's described in that video is just a supercharged version of what us mere mortals can do with our houses or an investment portfolio. Retirees take out reverse mortgages on their homes for a lifetime income stream without selling the home. Some people try to use margin loans on their investment portfolio and live off that without selling off the shares. You can make it work, but your interest rates aren't nearly as good as if you're a billionaire.
Yeah my family wasn't financially sophisticated either, but they also didn't do anything monumentally stupid either; which is more than I can say for some I know and counts for a lot.
I know of "second mortgages", but assumed they were a last resort if money was needed quickly.
They used to be. Then housing costs started going up and interest rates started going down, and people discovered that it was a lot of cheap money they could tap into.
I bought my first house as a foreclosure from someone who bought it and two others on the block with the goal of juggling lines of credit between the three to flip them. Then the housing market blew up, and so did his little venture.
Personally I treat my house as the one thing that literally keeps me from being out on the street, so I try not to do anything clever with its finances.
People that wealthy don't actually sell their assets so as to be subject to capital gains: they use them as collateral for low-interest rate equity lines of credit. Then when they die the cost basis for the assets gets reset, and the estate sells assets at the reset cost basis to settle the loan.
This is a good video on the subject
Not much different than getting a mortgage on a house than taking out a HELOC on the equity when the value goes up. It works until it doesn't, as 2008 showed us.
A lot of what's described in that video is just a supercharged version of what us mere mortals can do with our houses or an investment portfolio. Retirees take out reverse mortgages on their homes for a lifetime income stream without selling the home. Some people try to use margin loans on their investment portfolio and live off that without selling off the shares. You can make it work, but your interest rates aren't nearly as good as if you're a billionaire.
Yeah my family wasn't financially sophisticated either, but they also didn't do anything monumentally stupid either; which is more than I can say for some I know and counts for a lot.
They used to be. Then housing costs started going up and interest rates started going down, and people discovered that it was a lot of cheap money they could tap into.
I bought my first house as a foreclosure from someone who bought it and two others on the block with the goal of juggling lines of credit between the three to flip them. Then the housing market blew up, and so did his little venture.
Personally I treat my house as the one thing that literally keeps me from being out on the street, so I try not to do anything clever with its finances.