Buy, Borrow, Die: How the Wealthy Build and Keep Wealth
Buy, Borrow, Die is a common wealth strategy used by ultra-wealthy families to grow assets, access cash, and avoid income and capital gains taxes—legally. It's less about tax loopholes and more about understanding how the tax code treats borrowing and inheritance.
How It Works (in plain terms)
Buy: Invest in appreciating assets—real estate, stocks, businesses—that will grow in value over time.
Borrow: Instead of selling those assets to access cash (and triggering capital gains tax), borrow against them. Loans aren’t taxable.
Die: When the asset owner dies, heirs inherit the assets with a stepped-up cost basis. That resets the asset’s taxable value to its current market value, wiping out capital gains tax on decades of growth.
A Basic Example
Sarah builds a $10 million stock portfolio over 30 years. Her original investment was $2 million.
She borrows $5 million against her portfolio to buy homes, fund her lifestyle, and invest in other opportunities.
Because she never sells, she never pays capital gains taxes on the $8 million gain.
When she dies, her children inherit the portfolio and get a new cost basis of $10 million.
They could sell the stocks immediately and pay zero capital gains tax.
Case Study: Real Estate Investor
Michael, a 60-year-old real estate investor, holds $15 million in property purchased decades ago for $4 million. He:
Takes out $7 million in low-interest loans secured by the properties to fund retirement and invest in other deals.
Makes interest-only payments using rental income.
Never sells any property.
When he dies, his kids inherit the properties at current market value, avoiding $11 million in capital gains tax exposure.
Case Study: Tech Founder
Jessica, a tech founder, sells her startup and invests $20 million into diversified stocks. She:
Borrows $8 million over 15 years to fund her lifestyle and philanthropic goals.
Keeps the original stock portfolio intact to avoid realizing gains.
Uses a life insurance policy to manage estate liquidity and pay off debt at death.
Her kids inherit the $20 million portfolio with no capital gains taxes due.
Why It Works (Under Current Tax Law)
Loans aren't income, so there's no tax when you borrow against appreciated assets.
No capital gains tax is due until you sell—so if you never sell, you never pay.
Step-up in basis resets the value for heirs, effectively wiping out lifetime capital gains tax on the inherited asset.
Risks and Limitations
Asset prices can drop. If you're overleveraged, you may be forced to sell.
Interest rates matter. Rising rates make borrowing less attractive.
Tax law could change. Proposals to end step-up in basis or tax unrealized gains would hit this strategy hard.
Complexity. You need a team: a financial planner, estate attorney, and CPA all working in sync.
Is It Right for You?
This strategy is best suited for people with:
High-value, appreciating assets
Low liquidity needs or access to low-cost credit
Strong estate planning in place
If you’re a high-income earner, business owner, or real estate investor with long-term growth assets, we should talk about whether this fits your broader financial plan.
Related: 10 Money ($$) Lessons That Will Change How You Build Wealth
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About the author: Finn Price, CPFA, CEPA, is a business owner and wealth manager at Railroad Investment Group. He helps successful entrepreneurs & individuals with concentrated stock positions in their 30s, 40s and 50s build, organize, protect and transfer their wealth.
Note: this article is general guidance and education, not advice. Consult your money person or your attorney for financial, tax, and legal advice specific to your situation.
Securities and advisory services offered through LPL Financial, a registered investment Advisor, Member FINRA/SIPC.
