Buy, Borrow, Die

The wealth preservation strategy that lets the ultra-wealthy avoid capital gains taxes indefinitely.

Published January 3, 2026 ET
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The Core Strategy

Here's how it works:

  1. Buy - Dad buys stock at $250K
  2. Borrow - It grows to $12M. Instead of selling (and owing tax on an $11.75M gain), he borrows against it
  3. Die - He lives on the borrowed money. Never sells. Dies holding the asset

The kids inherit at a $12M stepped-up basis. The IRS gets $0.

Why Borrowing Works

Borrowing is not income. When you take out a loan against your assets, you're not realizing any gains—you're just accessing liquidity. No taxable event occurs.

This is the same principle that lets homeowners take out home equity lines of credit without paying taxes on the "income."

But Don't You Have to Pay Back the Loan?

Yes, the loan does need to be repaid eventually. But in this strategy, repayment typically doesn't happen during the borrower's lifetime.

During life:

  • Interest payments may be required (depending on terms)
  • These can be covered by further borrowing against appreciating assets
  • Or covered by income from those assets (dividends, etc.)
  • The principal rolls over without triggering taxable events

After death:

  • The debt is settled using proceeds from the estate
  • Heirs can sell a portion of the inherited assets
  • Those assets benefit from a stepped-up basis
  • Capital gains taxes on pre-death appreciation are minimized or eliminated

The Key Assumption

The assets must grow faster than the loan balance accumulates. If the portfolio returns 8% annually and the loan costs 5% in interest, the math works in your favor.

The estate ends up with enough value to cover repayment upon death—without the original owner ever selling and paying taxes on gains.

The Stepped-Up Basis

This is the linchpin of the strategy.

When you inherit assets, your cost basis "steps up" to the fair market value at the time of death. If Dad bought stock at $250K and it's worth $12M when he dies, you inherit it with a $12M basis.

If you sell it for $12M, your capital gain is $0.

All that appreciation during Dad's lifetime? Never taxed.

Who Uses This?

This strategy requires:

  • Substantial appreciated assets
  • Access to low-interest loans (often through private banks or securities-backed lines of credit)
  • Patience and long time horizons
  • Good estate planning

It's primarily used by the ultra-wealthy. Banks like Goldman Sachs, Morgan Stanley, and JPMorgan offer securities-backed lending specifically designed for clients in this situation.

Risks

  1. Market crashes - If your assets decline significantly, you may face margin calls and be forced to sell at the worst time
  2. Interest rate spikes - Rising rates can make the borrowing costs exceed your asset returns
  3. Legislative changes - There have been proposals to eliminate the stepped-up basis at death
  4. Concentration risk - This often involves holding a concentrated position rather than diversifying

The Policy Debate

Critics argue this strategy represents a loophole that allows the wealthy to avoid their fair share of taxes. The "Billionaire Minimum Income Tax" and other proposals have targeted the stepped-up basis provision.

Defenders argue it prevents double taxation (since the assets are often subject to estate taxes) and that changing the rules would create significant complexity and liquidity problems for family businesses and farms.

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