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Mr. Moneybags is 65 years old and worth $100M and lives in California.

He has all of his money at Fidelity (it's actually probably in a private bank, but whatever). It's invested in 60% stock, 20% bonds, 10% PE, and 10% Crypto. He's generating a return of 10% YoY.

His lifestyle costs him $500,000 annually. He's generating return of $1M annually. If he sells a portion of his portfolio, he has to pay taxes on it. He'd have to sell approx $1M a year to get his $500k after tax to live on.

Fidelity wants to keep him as a customer and keep all of his money invested with them because they make good money off of him. Normal borrowing rates are 5% in normal times. They'll offer him loans at 3% to keep him as a customer.

He borrows $500,000 using his portfolio as collateral. That's only $15k in interest in year 1. He can show income of $15k in year 1 and pay $0 in taxes so he'll sell $15k of his portfolio. So his portfolio went from $100M to $101M in that year and he sold $15k to pay his loan interest. He now has $100,985,000 at the end of the year and a debt of $500,000.

Rinse and repeat for 9 more years and say he dies at 75. (I'm not going to do the actual math the rest of the way, but I'll estimate). He now has $117M invested and a debt of $5M. His estate pays his $5M debt upon his death and his heir get $112M estate. His estate grew significantly more than it would have if he had to pay real taxes instead of borrowing.

Previous Message

Mr. Moneybags is 65 years old and worth $100M and lives in California.

He has all of his money at Fidelity (it's actually probably in a private bank, but whatever). It's invested in 60% stock, 20% bonds, 10% PE, and 10% Crypto. He's generating a return of 10% YoY.

His lifestyle costs him $500,000 annually. He's generating return of $1M annually. If he sells a portion of his portfolio, he has to pay taxes on it. He'd have to sell approx $1M a year to get his $500k after tax to live on.

Fidelity wants to keep him as a customer and keep all of his money invested with them because they make good money off of him. Normal borrowing rates are 5% in normal times. They'll offer him loans at 3% to keep him as a customer.

He borrows $500,000 using his portfolio as collateral. That's only $15k in interest in year 1. He can show income of $15k in year 1 and pay $0 in taxes so he'll sell $15k of his portfolio. So his portfolio went from $100M to $101M in that year and he sold $15k to pay his loan interest. He now has $100,985,000 at the end of the year and a debt of $500,000.

Rinse and repeat for 9 more years and say he dies at 75. (I'm not going to do the actual math the rest of the way, but I'll estimate). He now has $117M invested and a debt of $5M. His estate pays his $5M debt upon his death and his heir get $112M estate. His estate grew significantly more than it would have if he had to pay real taxes instead of borrowing.