alt Hacker NewsThe debt doesn't just go away, and interest is paid on it. It's not "free". Etrade's best rate is 10.45%. If your stocks go bust, you're still on the hook for the margin debt.
The debt doesn't just go away, and interest is paid on it. It's not "free". Etrade's best rate is 10.45%. If your stocks go bust, you're still on the hook for the margin debt.
That’s not how it works, though. Buy, borrow, die doesn’t rely on retail margin rates. It’s closer to 3-5%.
Assets are used as collateral for loans that don’t require any repayment until death. Generally the borrower can borrow up to 75% of their collateralized asset, and that loan is not taxed. When they die the assets are passed to heirs and stepped up to their current value as the new cost basis. They’re sold to repay the loan and interest. No taxes paid on the loan “income”, no taxes paid on the capital gains, 3-5% interest paid for the outstanding balance of the loan and I’m sure some of that gets taxed. Because the collateralized asset stays invested the entire time, it usually grows faster than the interest that will eventually be paid.