Use These Tax “Loopholes” to Get Richer

Andy Snyder|June 18, 2021

We got invited to one of those swanky garden parties last night.

It was the kind where a fella walks through a lush, overgroomed garden filled with rare and exotic blooms… and runs into a trio of violinists around each corner.

Their songs drew us through the garden like overdressed moths to the neon sign atop a pawnshop.

These players, it turned out, were some of the best of the best – professors, Ph.D.s, composers and professional students.

They came from all over the country to come and play us a tune by the hydrangeas, dahlias and five-seeded plume poppies.

We tapped our foot and smelled the roses.

It’d been awhile.

A Different Beat

The whole thing culminated in a bit of a show at the end.

All the players gathered for their first concert of the pandemic. They really got into it.

The bassoonist’s body convulsed with the beat. The oboist turned blue as he reached for the final note.

The most senior among them had her flute making noises that sounded like an old hit-and-miss tractor that had spun out of control. Floof… flop… floof… flop… whirrrrr.

The noises were so distinctive and so un-flute-like that she played them for the crowd in advance… just to prove she was doing it on purpose.

She was a Ph.D. of such racket, after all.

And the conductor… oh my, we feel for the guy. He seemed nice enough, but the players didn’t pay him much mind. He danced and swayed up front anyway. The more they looked away, the more explosive his shuffle became.

He looked like a mime trapped in a box that was quickly filling with quicksand.

We chuckled.

If it weren’t for the karate-chopping leg, he would have drowned right there in the open air.

Truth be told, we didn’t have to pretend we enjoyed the show. We did.

We knew it would give us something to write about in the morning.

Hide Your Money

You see, just before we closed our laptop for the day and fired up the car for the hour-and-a-half drive south to the garden, we read a note from a dear reader.

We’ve received hundreds like it before…

We have young couples that have already been weighed down with student loans that approach $100K. We have grandchildren in or entering college now that could use help.

For me and my family (we are over 80, with two special needs adopted children – now 37 and 40 – who will never be on their own), we are concerned with how to protect what little we have in retirement funds (presently I manage most of the funds). Seems that the gov’t is aiming to take all from those who have a little to give to those (many at least) who are too lazy to work for a living. Where do we put what we have? I know the rich are able to “hide” their money, but what can we do? – Reader Larry R.

First of all, adopting two special needs children… good on you. That’s an incredible sacrifice that few folks have the courage and selfless vision to muster.

Acts like that create a different kind of wealth… a wealth that can’t be taxed, redistributed or printed out and handed to anybody with an open hand and a closed mind.

But it does create a bit of an issue. It’s expensive. You can’t eat good deeds. And few landlords accept them as tender.

Fortunately, we’ve got some answers…

Passing the Hat

We’ll start with the student loan idea. It was on our mind last night as the tunes echoed in the garden. Several of the players were pursuing master’s degrees or doctorates at some of the biggest schools in the country. The others were teaching them.

Not surprisingly, at the same time they introduced themselves and shared their collegiate pedigree, they passed a pitcher through the crowd… saying any donations helped.

Playing 19th century tunes in a TikTok world is a tough gig.

Six-figure student loans are a real issue for these folks.

We had nearly two hours to discuss the subject with Mrs. Manward on the way home. She said it’s great they’re following their passions.

We don’t disagree. But when our pursuit of profitless passions consumes a nation that then votes for folks who will use somebody else’s money to fund those passions… we have a problem.

Helping students who can help multiply the GDP is one thing… Bailing out a perma-student who wants to make her flute sound like a broken tractor is another.

Our cure for this plague hasn’t changed. Don’t force kids and grandkids to go to college. Ban them from going for something silly. And, most importantly, use a 529 plan to help pay for it all.

We just wrote about it here.

How the Rich Get Richer

But the bigger idea in the note above is one that was quite evident last night… The rich sure do have it good.

There they were, heads down, arms behind their backs, strolling in their penny loafers across a lush garden, grazing from one charcuterie board to the next.

Not a pang of guilt in sight.

Not only do the rich get richer… they’re serenaded as they do it.

But here’s the thing with that. We’ve studied a lot of laws. We’ve stood in a lot of courtrooms, hearing rooms and other unpleasurable places. And we’ve yet to see a law that applies only to the rich.

There’s no financial litmus test that says you must be so rich before this statute takes effect.

It’s not that the rich have access to anything different… They don’t. It’s that they take advantage of what they have access to.

It’s why they’re getting richer.

It’s how you can too.

Just this week, our team discussed the notion of self-directed IRAs. We’re compiling a report on the subject and will send it to our paid subscribers.

These oddball retirement accounts are for the folks who want to do things differently. They allow you to own crypto… real estate… a business… and a whole slew of other things in an IRA.

If you’ve ever said, “There’s gotta be an alternative to stocks,” well, here’s your hoity-toity invitation to do what rich folks do.

These plans are open to anybody.

Or you can take advantage of those pass-through tax “loopholes” the taxman loves to hate.

Lots of rich folks get rich by using a business to filter their income. The government incentivizes it because, of course, businesses create jobs and add to the GDP.

Anybody can set up an LLC (limited liability company). Be smart with it and take full advantage of the opportunities it creates.

Our farm is an LLC.

The $149 filing cost has been paid for many times over.

We also paid a lawyer a few hundred bucks to create a trust. Going back to the reader’s note above, trusts are a wonderful tool for folks with dependent children.

Done right, they can do marvelous things to protect wealth that’s handed from one generation to the next.

Again… it’s how the rich stay rich – something they have every right to do.

Bottom line: Don’t think there is a single lever to pull that signals a bureaucrat to load up your bank account. There’s not. He’d be more likely to steal from it, anyway.

But there are ample tools available. They work. Just look at the headlines.

Sometimes we simply need to dance to a different beat.

Even if the maestro is doing a jig of his own.