Billionaires (usually) don't sell valuable stock. So how do they afford the daily expenses of life, whether it's a new pleasure boat or a social media company? They borrow against their stock. This revolving door of credit allows them to buy what they want without incurring a capital gains tax.
There are several ways you might reduce your estate, including spending assets, giving assets away, buying life insurance and putting assets in trusts. For most people who are impacted by the estate tax, trusts are integral to reducing an estate's size and may help to reduce estate taxes.
For the wealthy, life insurance is an unsexy yet powerful tactic for avoiding taxes. By putting the policy inside a trust, the death benefit is excluded from estate taxes.
Unlike most people, entrepreneurs and other ultrahigh-net-worth individuals typically do not pay taxes on their personal earnings, since their wealth stems from assets rather than salaries and bonuses.
In some years, billionaires such as Jeff Bezos, Elon Musk and George Soros paid no federal income taxes at all. Billionaires avoid these taxes by taking out special ultra-low-interest loans available only to them and using their assets as collateral.
Not only does Florida not tax capital gains, it has no state income tax or estate tax. That makes it ideal for the ultrawealthy who are considering estate planning, says Garcia. He expects more to move to the Sunshine State in the near future.
High net worth insurance is a liability-centric, niche insurance product (comprised of multiple policies and coverage layers) that is designed to protect the unique lifestyles of the world's wealthiest individuals.
In fact, many wealthy people can and do "live off the interest." That is, they put a chunk of their fortune in a relatively safe collection of income-generating assets and live off of that—allowing them to be more adventurous with the rest.
If you are the beneficiary of a life insurance policy and you owe the IRS, the IRS can seize those proceeds. Additionally, if you have a life insurance policy with no beneficiary named and you owe the IRS, the IRS can seize the policy funds before they are distributed to your next of kin.
Others will object to taxing the wealthy unless they actually use their gains, but many of the wealthiest actually do use their gains through the borrowing loophole: They get rich, borrow against those gains, consume the borrowing, and do not pay any tax.
Another key difference: While there is no federal inheritance tax, there is a federal estate tax. The federal estate tax generally applies to assets over $13.61 million in 2024 and $13.99 million in 2025, and the federal estate tax rate ranges from 18% to 40%.
The trust fund loophole refers to the “stepped-up basis rule” in U.S. tax law. The rule is a tax exemption that lets you use a trust to transfer appreciated assets to the trust's beneficiaries without paying the capital gains tax. Your “basis” in an asset is the price you paid for the asset.
Most of the government's federal income tax revenue comes from the nation's top income earners. In 2021, the top 5% of earners — people with incomes $252,840 and above — collectively paid over $1.4 trillion in income taxes, or about 66% of the national total.
Someone who has $1 million in liquid assets, for instance, is usually considered to be a high net worth (HNW) individual. You might need $5 million to $10 million to qualify as having a very high net worth while it may take $30 million or more to be considered ultra-high net worth.
This is by getting a mortgage and/or having investors invest with you. You leverage other people's money (OPM) to buy a property. An example of how we leveraged money was when we invested in a 77-unit apartment building in Albuquerque, New Mexico. We got a loan from a bank for 80% of the value of the building.
It has become especially popular because it can potentially be a gateway to millionaire status. The famed wealthy entrepreneur Andrew Carnegie famously said more than a century ago, “Ninety percent of all millionaires become so through owning real estate.
J.P. Morgan Private Bank, Citi Private Bank, and Bank of America Private Bank are among some of the most popular banks for millionaires.
In fact, an international study of high-net-worth individuals, conducted by Altiant, revealed that credit card use is a way of life for the wealthy — with half of them (49%) using them daily, and 31% using them more than once a day.
To qualify as a high-value home, a home typically has to be worth at least $750,000, though that's just a baseline; many high-value insurers only insure homes worth $1 million or more. Some insurance companies refer to a home's worth as its replacement cost value.
Private Medical is at the forefront of a new type of health care for the ultra-wealthy that has taken concierge medicine to a whole new level. The company, founded by Dr. Jordan Shlain, pioneered a highly personalized, all-in-one service that's more akin to the most sophisticated family offices for investments.
As of 2024, there are 756 billionaires living in 43 of the 50 US states or Washington, D.C. The only states with no billionaire residents are Alaska, Delaware, New Hampshire, New Mexico, North Dakota, Vermont, and West Virginia.
The lowest end of the income spectrum for people who could be considered upper middle class is $105,000, while the higher end of income veers toward $135,835. To be considered truly wealthy in Florida, you should be making about $476,546 — and of course, having millions in your savings doesn't hurt.
Funds and stocks are the bread-and-butter of investment portfolios. Billionaires use these investments to ensure their money grows steadily. Billionaires typically hold onto these investments, instead of trying to time the market for a quick buck.