It’s no secret, the rich hide money! And in today’s video, we’ll share with you the most
common ways the rich hide money to avoid taxes or for whatever other reason. So, make sure you watch
tile the end, now, let’s begin, shall we? 1) Municipal Bonds
Yes, it is very true that you can hide your money and protect it from being taxed by the government
just like the rich do. This is how it works. Municipal bonds are usually granted by local
governments or their agencies as a way of supporting major projects like roads,
ports, schools and so on. It is normally for public works. You buy a municipal bond
by investing a certain amount of money for a specified period. These bonds tend
to attract higher interest rates when compared to traditional savings accounts, as a result,
investors and the rich are very attracted to them. Municipal bonds act as a protective umbrella for
your money against taxation. The bonds investments are good because your capital remains safe
and it continues to generate interest for you. These bonds provide you with a reliable income.
I sincerely agree that these bonds are a great way of hiding your money like the rich.
2) Offshore Tax Havens Offshore tax havens are
places or countries that allow people or businesses to keep their money in their country.
The tax havens will charge these foreigners extraordinarily little or no tax at all.
It is very rare for tax haven countries to give out information to the foreign account holder’s
governments. Privacy is key to identifying the best country for a tax haven. In most countries,
it is illegal to have an offshore bank account and if caught you could get into serious trouble.
Switzerland is known to be one of the best tax havens particularly because of its strict privacy
rules and security for your money and assets. The Cayman Islands are also on the top list
of the best offshore havens. You will enjoy some interest from your offshore bank account as your
money remains safe. So, this is definitely a good way of hiding your money and enjoy the benefits.
3) Conservative Easements or Restrictions A large majority of rich people use conservative
easements to make sure they reduce tax on their income. Conservative easement is an agreement
between the landowner and the state whereby some rights of the land are transferred to the Easement
holder. However, the ownership of the land is retained by the landowner as he continues to
take care of the land. The landowner can decide to either farm the land or keep it as a forest.
The landowner can also live there if he so wishes. So, the owner of the land still has some rights.
By use of this conservative restriction, some have managed to reduce their gross income down to 50%.
The Conservative Restrictions have influenced many landowners to conserve and safeguard their
land. It is common knowledge that in the United States if you give out your qualified land to
a recognized protection body, you can enjoy a federal income tax deduction up to the value of
your land. This makes it very clear why the rich like to hide their money in Conservative Easement.
4) Qualified Opportunity Zones By investing in qualified opportunity zones,
you will be eligible to benefit from capital gains incentives. This is allowed strictly on this new
law. Opportunity zones are meant to improve the economically poor areas through engaging private
investments instead of using tax payer money. For an area to qualify as an opportunity zone
it has to meet certain requirements. One of these requirements is a poverty rate of 20%.
The investors can only benefit from the capital gain incentives if they invest through Opportunity
Funds. The rich would definitely go for this. 5) Life Insurance
Life insurance is another way of hiding your money like the rich. For life insurance, you just need
to open an account with an insurance company and start paying a certain amount of money regularly
as per the laid down policy rules. Once you put your money into your life insurance policy
account, you are not required to pay any taxes – it is tax-free. Any transactions you do with the
insurance company stays between the two of you. I mean the government or local authorities are
not informed. So, any premiums you pay or even the loans you acquire from the insurance company are
never taxed. If the insurance policyholder dies, the beneficiary will receive money intact without
any tax deductions. I guess this is a fantastic way of hiding money. The loans you get from your
life insurance policy if properly used can change your life for better. For instance, you can use
the money to start an income-generating business. You may also want to buy a piece of land or any
other property of your choice with a prospect of appreciating in the near future. So, if you
really want to hide your money like the rich, just open an account with an insurance company.
6) Money Gift Giving Money gift-giving is another
practised way of hiding money by the rich, that you can adopt. By giving money gifts
you can avoid paying taxes but only to a certain extent. If you give above the law requirement
limitation for free tax gift, then you have to be taxed. In order to avoid being taxed,
you can split your money gift and give it in halves or as you deem fit. If you are giving for
education or medical purpose you can channel the gift direct to the school or medical institution
to avoid taxation in case the money is above the tax-free limit. The United States federal gift
tax allows 15,000 dollars tax-free on gifts. So, hide your money by giving tax-free money gifts.
7) Offshore Subsidiaries Offshore subsidiaries are known as
one of the many ways the rich hide their money. This is very commonly used by big companies,
big corporations and international companies just to mention a few. The main purpose of
having these offshore subsidiaries is to evade taxation. These subsidiaries are registered in
countries abroad where corporate tax is minimal. The corporate tax is normally paid on net income
and by the company transferring income to the offshore subsidiary, it will greatly benefit.
The company will likewise transfer the expenses to the country with higher tax rates. This is
very clever of them. You can also emulate them and hide money by way of offshore subsidiaries.
8) Sec.199A Deduction Sec.199A deduction is a qualified business
income deduction that is meant for many people as well as estate. Trust, sole proprietorship,
partnership and S.Corporation and companies with limited liabilities. For all these entities,
a tax deduction of up to 20% is allowed. The deduction is not calculated from actual economic
expenditure needed for many other business deductions but from assumed business income.
The 20% deduction allowed on the business income for the eligible taxpayers is a good way of hiding
money. This is why the rich do not want to be left out of this beneficial idea of hiding money.
9) Charitable Investments Charitable investment is another way the rich
use to hide their money. The rich will go to any length to make sure they hide their money so as to
avoid paying taxes. This works by donating large amounts of money to charitable organizations.
The money is donated directly to the charity or is put in a charity savings account.
The advantage of this account is that you will see your money grow without any taxation.
Many donors will let their money grow first before giving it out and by so doing they will be able
to give more than they initially had. Delaying a little bit more before dishing out the money
will give you enough time to deliberate and decide which charitable organization you want to support.
10) Offshore Bank Accounts The rich people like hiding their money all over
the world where it is applicable and convenient for them. Most of them do it for political reasons
and others for security purposes. You often hear them reason that you just don’t “put all your
eggs in one basket”. Security of their money is crucial. Anyway, the primary reason they
do it is to avoid high taxation. They search for countries with minimal tax rates or no tax at all.
For sure it is not illegal to open bank accounts abroad. This is nevertheless not only for the
rich - any ordinary person can open an offshore account and likewise enjoy the benefits. By doing
this you will be able to earn capital gain while your money is not being taxed at all. This sounds
like fun. So, perhaps hide your money offshore as the rich do and enjoy the benefits as well.
11) Shell Corporations A shell corporation is not an active business
entity and may not even have major assets. The main idea of these shell corporations is to hide
or cover the owners. The government or the locals may never know who the owners are. Some of these
shell corporations could be illegal but there are those that are legit. The legit ones could
be used to raise funds for a startup or to obtain various finances. People are always suspicious of
these shell corporations because in many instances they have been used for illegal purposes. It can
also be misused in the case of gray area of tax evasion. This where people channel their earnings
through shell corporations in such a manner that it is not reflected as personal income.
Shell corporations are mostly set up abroad for the main reason of enjoying the low tax
rate or no tax at all. I would finally say that it is a bit difficult to distinguish the legit
ones from the illegal ones. The rich will always find ways of hiding their money, no matter what.
12) Issuing Stock Options The rich find issuing stock options
as another clever way of hiding their money. They issue the stock options to their stakeholders with
the aim of avoiding or lowering the amount subject to taxation. This is because when stock options
are issued, they are never regarded as an expense and it will automatically reduce the profits and
so the amount to be taxed will definitely be on the lower side. Again, the stock options issued
are recorded as an expense and they will not reflect as outflow in the account records since
there is no cash that changed hands. This means the company is able to reduce the profits on the
records and still enjoy an abundance of profits. This is not only a fantastic way of hiding money,
but also a way of motivating the stakeholders to put in more efforts for the benefit of all.
13) Writing Off Expenses Most rich people own businesses
and so they are able to write off expenses and lower their taxable income. I think this is a
very good way of hiding money by the rich. So, it is important to write off your day to day expenses
against your income in order to avoid taxation. Examples of these expenses are car maintenance,
entertainment and machines repair etc. The idea, if possible, is to hide all that you earn.
That’s it for today, thank you for watching. If you’re still here it means you enjoyed it,
don’t forget to leave it a thumbs up and share the video with your friends and family.
Have yourself a great day, and I’ll see you in the next one.