Epic Real Estate Investing - 10 Debt and Tax Strategies RICH PEOPLE ARE HIDING (Use ‘em Before You Lose ‘em) | 1376

Episode Date: November 1, 2024

In this podcast episode, we delve into the world of wealth-building with a focus on 10 powerful debt and tax strategies that the wealthy utilize to grow their fortunes—and how you can implement them in your own financial journey. We’ll explore innovative tactics like the 'Buy, Borrow, Die' strategy, which leverages asset appreciation for tax efficiency, and uncover the ins and outs of private placement life insurance, a tool that provides both protection and investment benefits.   We’ll also discuss the benefits of Roth IRA exploitation and how savvy investors maximize their tax-free growth potential. Charitable foundations are another critical topic, as we reveal how the affluent use them not only for philanthropy but as a smart tax strategy. Real estate depreciation will be examined for its ability to create significant tax advantages, while we’ll shed light on the carried interest loophole that allows hedge fund managers to pay lower tax rates.   Additionally, we’ll take a closer look at Opportunity Zones, which offer lucrative tax incentives for investment, and explore Family Limited Partnerships (FLPs) as a means of asset protection and estate planning. You’ll learn about intentionally defective grantor trusts (IDGTs) and how they can help with wealth transfer, as well as deferred compensation plans that enable high earners to manage their tax liabilities strategically.   Join us as we unpack these sophisticated methods that help the rich sidestep taxes and accumulate wealth. With practical insights and expert advice on navigating the complexities of the tax code, you’ll come away with actionable steps you can discuss with your CPA to protect and enhance your financial future. Don't miss this opportunity to unlock the secrets of the wealthy and take control of your financial destiny! Learn more about your ad choices. Visit megaphone.fm/adchoices

This is Terio Media. Hey, strap in. It's time for the epic real estate investing show. We'll be your guides as we navigate the housing market, the landscape of creative financing strategies, and everything you need to swap that office chair for a beach chair. If you're looking for some one-on-one help, meet us at rei-aise.com. Let's go, let's go, let's go, let's go, let's go, let's go.

Let's go. The rich are playing a different game, and they don't want you to know the rule. I'm about to expose 10 debt and tax strategies the wealthy use to keep rolling their fortune and how you can use them to. Ever heard of the buy, borrow, die strategy? Well, this is secret number one. I mean, imagine owning something valuable and it grows in value and then it creates a profit for you, but you never have to pay taxes on it. That's exactly what the wealthy do by borrow die, a strategy that's completely legal, but has average people in the total dark. Here's how it works. They buy an asset.

borrow against its value and never sell it, avoiding taxes. When they pass away, the asset's value resets for their heirs. It might sound like a loophole, but it's called the stepped-up basis. This allows the assets value to reset, so no taxes are paid on the gains when it passes to heirs. But this loophole isn't just for billionaires. You don't need to own a mansion for this to work. Any growing asset, like a rental property, can give you the same benefits.

By leveraging the strategy, you can build wealth over time, borrow against it without selling it, and pass it on to your heirs without a huge tax hit, or any tax hit for that matter. It's a simple legal way to keep more of your money growing for the next generation without sacrificing any of the time that you're here walking the earth. But that's just one secret of many. Next, let's look at how they use this secret. It's the private placement life insurance. And it's a half that the rich use to grow their wealth tax-free.

legally. It's a special life insurance policy that acts like a tax-free investment account. The wealthy use it to grow and shield their money. But it gets a lot of scrutiny because critics argue it's a tax shelter for the ultra-wealthy, letting them dodge taxes that everyone else has to pay. And they're not wrong, but there's a version that you can use too. I mean, even on a smaller budget, whole life or indexed universal life insurance can grow tax-free, letting you borrow against it without triggering taxes. I mean, sure, it's not the hedge fund returns of the ultra-rich, but it's still a smart way to grow wealth long-term. I mean, if you ever wonder why your savings aren't growing as fast, it's because the wealthy have found ways to sidestep the usual tax traps, like with secret number three, the Roth IRA

exploitation. Wealthy people use Roth IRAs to invest in things like pre-IPO stocks, making millions tax-free. They invest early, watch their money grow, and never pay a cent in taxes on those gains. So why is the IRS paying very close attention to this one? Well, it is a bit of a loophole, bending the original intent of Roth IRAs to shield massive wealth instead of modest retirement savings. But here's how you can still use it to your advantage.

While pre-IPO stocks may be out of reach, you can use your Roth to buy growth stocks or even crypto, taking advantage of tax-free exponential gains. The idea is simple. Let your money grow without the IRS ever touch in it. These strategies, they require. require funding, and that's often where people get stuck. But here's a solution that you can use right now. You see, if you're a real estate investor or small business owner with a 680 credit score or

better, no collections or bankruptcies in the last seven years, you can get up to $150,000 of zero percent interest capital. It's one of the fastest, easiest ways to access substantial credit and start applying these debt strategies of the rich. It's quick, hassle-free, and like the name says, at no cost. Check it out to add a serious boost to your debt strategies at no-costcapital.com. Some of these strategies might not be around forever, so act before they're gone. Secret number four, charitable foundations. And this one, it initially causes some head scratching, you know, when people first hear of it. But the wealthy get tax breaks while donating money to their own foundations. Think the Clinton Foundation. It's money that can

stay in their control and grow tax-free. Sounds too good to be true, right? Well, it's called setting up a private charitable foundation. But critics call it a tax trick in disguise. The wealthy have to give away only a tiny fraction of their money every year, while the rest compounds tax-free. But this isn't just for the ultra-rich. On a smaller scale, the average person can use a donor-advised fund, a DAF, to do something very similar. I mean, imagine making a one-time donation, taking the tax deduction now, and spreading out the charitable giving over time. Plus, your money grows tax-free, while you decide where it go. Secret number five, real estate depreciation.

I mean, have you ever heard of getting paid to lose? Wealthy real estate investors do just that by taking advantage of depreciation. They claim losses on properties that are actually appreciating. How does that happen? And it naturally doesn't spark some outrage. You see, critics argue that it lets investors dodge taxes while the properties value skyrockets. It's like tax magic, you know, losses on paper, but gains in the bank account. But it's not magic.

It's written right in the tax code, and it applies to everybody who pays taxes. And guess what? You don't need to own a skyscraper to benefit from depreciation. Even a single rental property can offer tax advantages by letting you offset rental income. This strategy is how everyday people can build wealth, like real estate mobles, without the tax burden. Real estate is great for cash flow and long-term wealth. But what about other types of income? You see, wealthy fund managers have another trick up their sleeve, the carried interest loophole.

And that's secret number six. Is a loophole so famous, even Congress has tried to close it without much luck? And because of it, private equity and hedge fund managers pay a much lower tax rate on their earnings by treating them as capital gains instead of income. And naturally, there's controversy because critics argue that these wealthy managers get to dodge income tax by turning their pay into investments. And even though it's been called out for years, it's still wide open. Now, while most people can't exactly use this one as is, there's a lesson here. Your income source matters. Capital gains are taxed lower than income. So investing in stocks or property and holding them over a year can mean a lower tax bill compared to regular income. Borrowing against those

investments creates a different kind of income that isn't taxed at all, as explained in the buy, borrow-dye strategy. From private equity to real estate, there's a wide range of strategies the wealthy use. The government has a program called Opportunity Zones, and that's secret number seven, where the wealthy can invest in distressed areas to reduce or delay their capital gains taxes. But here's the catch. Many of these areas aren't exactly struggling. So it's essentially a tax break for those who can afford to buy in. And critics argue that this helps wealthy investors, not the neighborhoods. The program's benefits go to those with capital to invest, potentially gentrifying areas rather than helping them.

But this isn't out of reach. Anyone can roll over gains from other investments into an opportunity zone fund. This lets you defer taxes and possibly pay less when you cash out. It's a way for your average Joe to keep more of their money working for them. Secret number eight, family limited partnerships, FLPs. See, wealthy families use these all the time to pass down wealth without the tax hit. They transfer assets to these partnerships, applying discounts to reduce their estate taxes.

And here's where it gets criticized. FLPs let wealthy families shrink their taxable estates. And the IRS? Well, let's just say they've got their eye on this one too, looking to crap down on partnerships set up purely for tax reasons. While FLPs are high-level strategies, even smaller estates can use gifting strategies or trust to lower tax impact. Parents or grandparents can pass on assets while claiming legal discounts,

helping to preserve family wealth across generations. Secret number nine, intentionally defective grantor trusts, IDGTs. I mean, the name says it all. Intentionally defective. You see, it's a trust with a twist. Wealthy people transfer assets but still pay taxes on them, keeping the assets out of their estate and helping them avoid estate taxes. The IRS keeps a close watch on IDGTs, calling them legal loopholes

that blur the line of ownership and taxes. But as long as it's in place, the wealthy use it to transfer wealth under the radar. While IDGTs are complex, anyone can consider trusts in estate planning. Trusts protect assets, provide control over distribution, and yes, reduce the estate tax burden. Even if you're not building a billion dollar estate, this can help create a legacy with fewer tax hassles. So we've talked about trusts and estates, but what about income? Well, here's how the rich manage their earnings to minimize taxes. It's secret number 10, the deferred compensation plan.

You see, the rich don't always take all their earnings up front. They use deferred compensation plans pushing income to a future date to pay taxes later when they'll be likely in a lower bracket. The critics say this is just game playing. You're playing games with the tax system, with the wealthy delaying income and lowering taxes, yet still enjoying their earnings. These plans are usually off limits to the average worker be, though.

But here's the part you can use, tax-deafers. deferred accounts. So whether that's a 401k or an IRA, anyone can reduce their taxable income now and pay later when they may be in a lower tax bracket. It's like having a small slice of the deferred compensation advantage. The bottom line, these strategies aren't just tricks. They're smart ways the wealthy leverage the tax code to build and protect their wealth. But you don't have to be a billionaire to get in on the game. The rules of the tax code are in plain sight. So share this with your CPA and work together to apply what makes sense for your specific situation. I'll see you next time. Take care.

And that wraps up the epic show. If you found this episode valuable, who else do you know that might too? There's a really good chance you know someone else who would. And when their name comes to mind, please share it with them and ask them to click the subscribe button when they get here and I'll take great care of them. God loves you and so do I. Health, peace, blessings, and success to you. I'm Matt Terrio.

Living the dream. You didn't know home world, we got to dash low. This podcast is a part of the C-suite Radio Network. For more top business podcasts, visit c-sweetradio.com.