Athlete's salary

[bobbylalal]

I was wondering how athlete's, movie stars, traders, lotto winners etc. save their money? Do they put their millions in one bank account? I think I read somewhere that banks can insure up to $100k so would someone who has $500k put $100k in each of the 5 big Canadian banks? Or is there some secret Stonecutter's bank account for rich people to store their money?

[deep]

I was wondering how athlete's, movie stars, traders, lotto winners etc. save their money? Do they put their millions in one bank account? I think I read somewhere that banks can insure up to $100k so would someone who has $500k put $100k in each of the 5 big Canadian banks? Or is there some secret Stonecutter's bank account for rich people to store their money?
Who the hell would put that much money into a bank account?

[qster]

They hire a professional (financial adivisor) to invest your money.
A lot of rich people store they money in off-shore accounts or if they have enough, they open a Swiss account to avoid paying any taxes on the interest they accumulate.

Imagine if you have $10,000,000 in a bank account that gives you say 5% interest annually. That's $500,000 you would earn in interest. If you leave it in the USA or Canada, its taxable income. Leave it to compound in a Swiss or off shore account and avoid the taxman and it just keeps compounding.

Of you invest that $10 Million with a good investment advisor and diversify and hope to get an annual return of say 10-15% ($1-1.5M), bonus if the stocks you buy issue a dividend.

So.. now you know how the rich get richer.

Leaving your money in a low interest account is just plain senseless.

[cadave]

They hire a professional (financial adivisor) to invest your money.
A lot of rich people store they money in off-shore accounts or if they have enough, they open a Swiss account to avoid paying any taxes on the interest they accumulate.

Imagine if you have $10,000,000 in a bank account that gives you say 5% interest annually. That's $500,000 you would earn in interest. If you leave it in the USA or Canada, its taxable income. Leave it to compound in a Swiss or off shore account and avoid the taxman and it just keeps compounding.

Of you invest that $10 Million with a good investment advisor and diversify and hope to get an annual return of say 10-15% ($1-1.5M), bonus if the stocks you buy issue a dividend.

So.. now you know how the rich get richer.

Leaving your money in a low interest account is just plain senseless.

If you're a resident of Canada, you're taxable on your worldwide income in Canada. I do believe that would include the interest from the Swiss or off shore accounts. :)

[dmdsoftware2]

If you're a resident of Canada, you're taxable on your worldwide income in Canada. I do believe that would include the interest from the Swiss or off shore accounts. :)

He's suggesting you don't claim it with Revenue Canada. These Swiss banks don't have a tax treaty with Canada, so the funds are hidden from Revenue Canada.

[harlequin]

I don't think an athlete earning millions of dollars would get away with not declaring their income earned in a Swiss bank account, if the amount was signifigant. The CRA would have some idea of what the athlete earns. From this information they would make an estimate of what their income should be. If the figure on the tax return is quite a bit below this, it may trigger an audit. Even if the CRA can't see what is going on in the Swiss bank account, they can simply reassess the return to what they think it is likely to be, and it is up to the athlete to prove otherwise.

Another problem is the fact that we have to tell the CRA if we have more than 100K of assets outside Canada. If the athlete did not disclose their Swiss bank account, they would be making a false declaration - a serious offense.

[gerbil]

most people with high incomes would invest into a real state or even having their own business or take part in a business investement.

it's a really good point that this was asked ..

for example:
does anybody heard of hoopdome (http://www.hoopdome.com/)? it's located in the heart of Downsview in Toronto. Several people in the basketball industry had this idea where people who loves to play and shoot hoops everyday of the week. It's all basketball. It was organized by several people like Glen Grunwald, who used to be VP of Raptors - now VP of Basketball Operations of NBA, Chuck Sworski (I think it's spelled like this) - Raptors Commentator, Jerome Williams - former Raptors Forward and others more.

[qster]

He's suggesting you don't claim it with Revenue Canada. These Swiss banks don't have a tax treaty with Canada, so the funds are hidden from Revenue Canada.

+1

Tax evasion is illegal...
Tax avoidence is not...

Why do you think so many musicians and athletes move to say Switzerland or Florida (no state tax).

Athletes who earn Millions pay the taxes then... but what they do after that is up to them and the IRS can't really track it if they pretend the gave some money away or they spend it like water...all the while its in an off shore account.

Tell that to the thousands of rich people who have assets abroad and don't claim it to the CRA. An asset could be a house/property that has no value until you sell it for profit. So CRA or IRS can't tax you on property that is an asset if its not generating income for you.
What the CRA is looking for is.. if you have $100K+ invested (cash) abroad... so they can get their greedy paws on that...all the while you've already paid taxes on it already (foreign taxes).

[HammerRFDer]

They throw it into that safe store of value known as Asset-Backed Commercial Paper (http://www.theglobeandmail.com/servlet/story/RTGAM.20071115.wabcp-investors1117/BNStory/Business/). hahaha.

[pitz]

Michael Vick borrowed a gazillion bucks from the Royal Bank, and bought a dog fighting ranch with his loot :(. And look at where that got him.

[UrbanPoet]

They dont really deal with the banks normally. they deal with it through what my company calls "private banking".
This is for high value clients. They usually have their own banking packages setup along with a team of Financial advisers.

[Thalo]

They dont really deal with the banks normally. they deal with it through what my company calls "private banking".
This is for high value clients. They usually have their own banking packages setup along with a team of Financial advisers.

Exactly. The bulk of their wealth is in managed investment accounts, such as TD Waterhouse Private Investment Council. They just dump their millions in there and let a portfolio manager invest it for them (discretionary trading).

Regarding CDIC: If someone with $millions wants a government guarantee on all their money, they buy T-Bills and government bonds.

[Capt.]

A lot of time athletes own businesses directly like nightclubs, restaurants, that kind of stuff. For example, Wayne Gretzky's restaurant here in downtown Toronto.

[moebius]

The Swiss banks don't pay high rates - that's why they make money. It is more for safety and security of the money that people hold their money there (also the tax evasion).
Some rich people certainly have more than 100,000 in bank account and certainly more than whatever-that-figure-for-investment-account-was (1mil?). If TD or any other big bank fails (which it can), it is probably because the whole system failed. In that case little use of your money in the bank - might as well use it for heating...

[Madchester]

I was wondering how athlete's, movie stars, traders, lotto winners etc. save their money? Do they put their millions in one bank account? I think I read somewhere that banks can insure up to $100k so would someone who has $500k put $100k in each of the 5 big Canadian banks? Or is there some secret Stonecutter's bank account for rich people to store their money?

A lot of them invest in real estate. There was a recent article in the globe on that topic.

http://www.theglobeandmail.com/servlet/story/RTGAM.20071026.re-sports-1026/BNStory/RealEstate/home?cid=al_gam_mostemail

The article describes Rebagliatti as being remembered as the first Oympic gold medalist in snowboarding... I'd argue otherwise.....:cheesygri