What Is the Buy, Borrow, Die Strategy?
Most people work hard, pay taxes on every dollar they earn, and hope to retire comfortably. Meanwhile, the ultra-wealthy seem to grow richer every year, often paying remarkably little in taxes. How? The answer, for many high-net-worth individuals, is a strategy widely known as Buy, Borrow, Die.
This approach is not a loophole, nor is it illegal. Instead, it is a disciplined method of using the tax code exactly as it was designed. Understanding it could change the way you think about wealth, investing, and financial planning.
In this guide, we break down the full strategy in plain English. We cover how it works, who uses it, what the risks are, and how everyday investors can begin applying similar principles. By the end, you will have a clear picture of why the wealthiest families in the world rarely sell their assets.
The concept of Buy, Borrow, Die was popularised by law professor Edward J. McCaffery in the 1990s. His insight was simple but profound: the U.S. tax code rewards those who accumulate assets, borrow against them, and then pass them on to heirs. Each step carries a specific tax advantage.
First, you buy appreciating assets. Second, you borrow against those assets to fund your lifestyle or further investments. Third, at death, your heirs inherit the assets at a stepped-up cost basis, effectively erasing decades of capital gains tax.
Judge Learned Hand, a famous American jurist, once said that there is nothing wrong with arranging your affairs to keep taxes as low as possible. The Buy, Borrow, Die strategy is, at its core, doing exactly that.
Today, this strategy is back in the spotlight. As discussions around wealth inequality and fair taxation intensify, understanding how the top 1% manage their money has never been more relevant.
The Three Phases Explained
Phase One: Buy
The strategy begins with purchasing assets that appreciate over time. Typically, these include stocks, real estate, private equity holdings, and increasingly, cryptocurrency.
Crucially, the wealthy do not sell these assets to fund their spending. Selling triggers a capital gains tax event. Instead, they hold assets indefinitely, allowing them to appreciate without creating a taxable event.
This holding pattern is one reason why the ultra-wealthy accumulate so much more than they consume. A recent study by economists Liscow and Fox (2025) found that for the top 0.1% by net worth, simply not selling is the dominant tax-avoidance strategy. The rich, as they put it, earn substantially more than they consume on an annual basis.
Compounding works best when uninterrupted. Every time you sell an asset and pay tax, you reduce the capital available to grow. Avoiding that sale keeps more money in the market, generating further returns year after year.
Phase Two: Borrow
Here is where the strategy gets truly clever. Instead of selling assets to access cash, high-net-worth individuals borrow against them. This borrowing typically takes three main forms.
Securities-based lines of credit (SBLOCs): These are loans secured by a brokerage portfolio. Lenders such as Merrill Lynch and Morgan Stanley offer these products to affluent clients.
Margin loans: Borrowed directly from a brokerage, a margin loan lets you pledge your investment portfolio as collateral and access cash at relatively low interest rates.
Home equity lines of credit (HELOCs): Real estate owners can tap a HELOC to borrow against the value of their property without selling it.
The key advantage is clear: loans are not income. The IRS does not tax borrowed money. So, you can access hundreds of thousands of dollars, fund your lifestyle or new investments, and owe zero in capital gains tax on those proceeds.
Additionally, your assets remain invested throughout this process. A portfolio pledged as collateral still participates in market growth. This means you are simultaneously accessing liquidity and continuing to compound your wealth.
Phase Three: Die
The final phase is the most powerful. Under current U.S. tax law, when a person dies, their heirs receive a stepped-up basis on inherited assets. This means the cost basis resets to the asset’s fair market value on the date of death.
Consider an example. Suppose someone purchased $1 million worth of stock 30 years ago. Today, that stock is worth $10 million. If they sell, they owe capital gains tax on $9 million in profit. However, if they die holding the stock, their heirs inherit it at the $10 million value. The entire $9 million in appreciation is never taxed.
Furthermore, the outstanding loans against those assets get repaid from the estate. The heirs pay off the debt, keep the stepped-up assets, and begin the cycle anew. As Instead.com notes, neither the investor nor their heirs ever pays capital gains tax on the appreciation.
This is why the step-up in basis rule is so controversial. Critics argue it permanently shelters generational wealth from taxation. Supporters argue it prevents double taxation and simplifies estate administration.
A Comparison: Selling vs. Borrowing
To understand the financial difference, consider two investors with the same $5 million portfolio. One sells assets to fund spending. The other borrows. The table below shows the contrast.
| Scenario | Action | Tax Owed | Portfolio Growth Continues? | Heirs Benefit? |
|---|---|---|---|---|
| Investor A | Sells $500K in stock | ~$119K (23.8% cap gains) | Heirs inherit the sold proceeds | Reduced estate |
| Investor B | Borrows $500K via SBLOC | $0 | Yes – assets stay invested | Full stepped-up basis |
| Investor A (estate) | Heirs inherit the full portfolio | Paid during lifetime | N/A | Cash only, no step-up |
| Investor B (estate) | Heirs inherit the full portfolio | $0 capital gains ever | Yes – until heirs sell | Full step-up in basis |
The difference over decades is staggering. Investor B keeps more capital compounding, pays no capital gains during their lifetime, and transfers far more wealth to the next generation.
Who Actually Uses This Strategy?
You might assume this is exclusively the domain of billionaires. In truth, this strategy operates on a spectrum. Some elements are accessible to investors with relatively modest portfolios. However, the full version of Buy, Borrow, Die is most effective at very high net worth levels.
Elon Musk, Jeff Bezos, and Larry Ellison have all reportedly borrowed against their equity holdings to fund personal expenses rather than selling shares. ProPublica’s Secret IRS Files investigation revealed how many of the world’s wealthiest individuals pay surprisingly low effective tax rates precisely because they avoid realising income.
Beyond billionaires, successful real estate investors, business owners, and portfolio investors frequently use variations of this strategy. Anyone with a substantial brokerage account or real estate holdings can explore borrowing rather than selling.
Importantly, crypto investors are now joining this trend. Platforms like CoinRabbit allow holders of Bitcoin and Ethereum to borrow against their digital assets without credit checks. This democratises access to the strategy in a meaningful way.
The Role of Cryptocurrency in Modern Borrow-Until-You-Die Strategies
Digital assets have introduced a new dimension to this strategy. Traditional versions rely on the step-up in basis at death. However, crypto investors often focus on an even simpler variation: borrow indefinitely and never sell.
Bitcoin, in particular, has attracted this approach. Long-term holders believe its value will continue rising over time. Rather than selling BTC to cover expenses and paying capital gains tax on crypto, they borrow stablecoins or fiat against their holdings.
Crypto lending platforms process loans quickly. Many operate 24/7, require no credit checks, and accept a wide range of digital assets as collateral. This makes the borrow-against-assets concept available to younger investors who may not yet have traditional brokerage portfolios.
Of course, crypto collateral carries significant volatility risk. If the value of your crypto drops sharply, lenders may issue a margin call, forcing you to repay part of the loan or add more collateral. This risk is considerably higher than with traditional asset classes.
For crypto investors, the strategy works like this: acquire Bitcoin or Ethereum, pledge it as collateral, borrow a percentage of its value, and use those proceeds to fund life or invest further. The assets stay in your name, continue appreciating in theory, and the loan is eventually repaid from future gains or estate proceeds.
Tax Implications: What You Really Need to Know
Understanding the tax angles is essential before considering any variation of this strategy. Several key rules shape how it works in practice.
Capital Gains Tax
When you sell an asset for more than you paid, you owe capital gains tax. Short-term gains, on assets held under one year, are taxed as ordinary income, reaching up to 37%. Long-term gains, on assets held over one year, are taxed at 0%, 15%, or 20% depending on your income level. An additional 3.8% Net Investment Income Tax may also apply for high earners.
By borrowing instead of selling, you defer or entirely avoid this tax. The loan proceeds are not classified as income under IRS rules, so they create no immediate tax liability.
The Step-Up in Basis Rule
This is the linchpin of the entire strategy. Under IRC Section 1014, assets transferred at death receive a new basis equal to fair market value on the date of death. All appreciation during the deceased’s lifetime goes untaxed.
This rule has been debated in Congress for years. Proposals to eliminate or limit the step-up have surfaced repeatedly but have not yet become law. For now, it remains a cornerstone of estate planning for the wealthy.
Estate and Inheritance Tax
While capital gains taxes are avoided through the step-up, large estates may still face the federal estate tax. As of 2025, the federal estate tax exemption is approximately $13.6 million per individual. Estates above this threshold are taxed at rates up to 40%.
Wealthy families use a variety of tools to minimise estate taxes, including irrevocable trusts, family limited partnerships, and charitable giving strategies. The Buy, Borrow, Die approach works best when combined with thoughtful estate planning.
Interest Deductibility
In some situations, interest paid on loans secured by investment assets may be deductible as an investment interest expense. This can further reduce your tax bill, though specific rules apply and professional guidance is essential.
Key Vehicles Used in the Strategy
Let us look more closely at the specific financial instruments that make this strategy possible.
| Instrument | Collateral Used | Typical LTV Ratio | Key Risk | Best For |
|---|---|---|---|---|
| SBLOC (Securities-based line of credit) | Brokerage portfolio | 50-70% | Margin call if portfolio drops | High-net-worth investors |
| Margin Loan | Stocks/ETFs | 50% | Forced liquidation risk | Active investors |
| HELOC | Real estate | 80-90% | Interest rate fluctuation | Property owners |
| Crypto-backed Loan | Bitcoin/Ethereum | 30-60% | High volatility, margin calls | Crypto holders |
| Portfolio Loan | Mixed assets | Varies | Depends on collateral mix | Diversified investors |
Each instrument carries its own risk profile. The loan-to-value (LTV) ratio determines how much you can borrow relative to your asset value. Lenders typically lend less against volatile assets like crypto and more against stable, diversified equity portfolios.
How Real Estate Investors Use This Strategy
Real estate is, perhaps, the most natural home for Buy, Borrow, Die thinking. Property values tend to rise over time. Owners can refinance or access a HELOC to pull out equity without selling the asset. Upon death, heirs inherit the property at its current market value, with no capital gains owed on decades of appreciation.
Consider a property bought in 1995 for $200,000 that is now worth $1.2 million. If the owner sells, they owe capital gains tax on $1 million of profit. However, if they take out a cash-out refinance and access $500,000 in equity, they pay no tax and still own the property.
Savvy real estate investors also use the 1031 exchange to defer capital gains when selling one property and buying another. Combined with borrowing strategies, this allows continuous portfolio growth with minimal tax friction.
As discussed in The Truth About the Borrow Until You Die Strategy, real estate investors can buy a primary residence, convert it to a rental after one or two years, borrow against appreciated equity, and use those funds for a new property purchase. Over time, this compounds into a significant portfolio.
A primary residence purchase, for instance, requires only 3.5% to 5% down payment in many cases. That means $25,000 can secure a $500,000 home. Once that property appreciates, borrowed equity can fund another acquisition, and the cycle repeats.
Step-by-Step: How to Implement This Strategy
You do not need to be a billionaire to begin applying these principles. However, you do need a clear plan and professional guidance. Here is a simplified framework for getting started.
Step 1: Build Your Asset Base
Start by consistently investing in appreciating assets. For most people, this means index funds, ETFs, real estate, or a combination. Focus on long-term holdings rather than frequent trading, which triggers capital gains events.
The goal is to accumulate a portfolio large enough to borrow against meaningfully. Most SBLOCs require a minimum portfolio value, often $100,000 or more. Build toward that threshold while keeping tax efficiency in mind from the start.
Step 2: Avoid Unnecessary Sales
Develop the discipline to hold assets through market cycles. Selling during downturns or to fund lifestyle expenses short-circuits the strategy. Instead, focus on building income streams, such as dividends, rental income, or business revenue, to cover living costs without selling capital assets.
Tax-loss harvesting is a complementary technique. It allows you to sell underperforming assets to offset gains elsewhere, while remaining invested in the market through similar replacement assets.
Step 3: Explore Borrowing Options
Once your portfolio reaches sufficient scale, work with a financial advisor to explore borrowing options. Compare interest rates across SBLOCs, margin loans, and HELOCs. Understand the terms, including what triggers a margin call and how lenders respond to collateral value drops.
Keep the loan-to-value ratio conservative. Borrowing 30% to 40% of your portfolio’s value is far safer than pushing to 70%. A market correction could trigger forced liquidation if you are too leveraged, undoing years of work.
Step 4: Plan Your Estate
Work with an estate planning attorney to ensure your assets pass efficiently to heirs. This includes reviewing beneficiary designations, establishing trusts where appropriate, and understanding how your state’s laws interact with federal estate tax rules.
Reviewing IRS Publication 559 provides detailed guidance on how executors and heirs manage inherited assets. Understanding these rules in advance prevents costly mistakes during estate settlement.
Risks You Must Understand
No strategy is without risk. Buy, Borrow, Die has real dangers that can unravel financial plans if not managed carefully.
| Risk | Description | Mitigation |
|---|---|---|
| Margin call | Diversify estate planning strategies; consult an attorney | Keep LTV ratio below 50%; maintain cash reserves |
| Interest rate risk | Rising rates increase borrowing costs over time | Use fixed-rate products where available; monitor rates |
| Legislative risk | Congress may eliminate or limit the step-up in basis | Borrowed funds may not cover unexpectedly large expenses |
| Liquidity risk | Maintain a separate liquid emergency fund | Maintain a separate liquid emergency fund |
| Crypto volatility | Digital assets can drop 50-80% rapidly | Borrow conservatively; keep LTV below 30% for crypto |
| Estate complexity | Large leveraged estates require careful administration | Hire experienced estate planning and tax professionals |
Margin calls deserve special attention. If your portfolio drops in value and your loan balance exceeds the lender’s acceptable LTV threshold, they can demand immediate repayment or sell your assets without notice. This risk becomes most dangerous when asset prices fall across the board, which is exactly when you least want to be forced into selling.
Legislative risk is also real. Several proposals have been put forward to reform or eliminate the step-up in basis. Keeping abreast of tax policy changes is important for anyone relying on this approach.
The Wealth Gap Debate: Is This Strategy Fair?
Critics of Buy, Borrow, Die argue that it contributes to growing wealth inequality. Ordinary wage earners pay income tax on every dollar they earn. The ultra-wealthy, by contrast, may pay minimal tax for decades while their assets compound.
A study by economists Liscow and Fox (2025) found that borrowing represents only about 1% of the economic income of the top 0.1% by net worth. Their more dominant strategy is simply holding assets and allowing gains to accrue without ever triggering a taxable event. The strategy is sometimes called “Buy, Save, Die” in academic circles.
Supporters counter that these individuals also pay estate taxes on large fortunes, invest capital that creates jobs, and take genuine economic risks. Moreover, the tax code was deliberately designed with incentives to encourage long-term investment and capital formation.
The debate reflects broader questions about the purpose of the tax system. Whether you see this strategy as clever planning or an unfair advantage depends largely on your perspective. What is clear is that the rules currently allow it, and understanding them is valuable for anyone seeking to build long-term wealth.
Adapting the Strategy for Everyday Investors
You do not need a nine-figure portfolio to apply these principles. Several practical adaptations exist for regular investors who want to minimise taxes and build long-term wealth.
Use Tax-Advantaged Accounts
Contributing to a 401(k), Roth IRA, or Health Savings Account (HSA) reduces your current tax bill and allows assets to grow tax-deferred or tax-free. These are the most accessible forms of tax-efficient investing for most people.
Hold Long-Term
Simply holding investments for more than one year before selling shifts your gains to the long-term capital gains tax rate, which is lower than the ordinary income rate. This is the most basic version of the buy-and-hold principle at the core of Buy, Borrow, Die.
Explore a HELOC
Homeowners can access a home equity line of credit to borrow against property equity without selling. This provides liquidity while keeping the property in place and potentially benefiting from further appreciation.
Consider Direct Indexing
Direct indexing, offered by platforms like Parametric and Wealthfront, allows investors to own individual stocks within an index. This enables aggressive tax-loss harvesting, reducing your tax bill while keeping you fully invested in the market.
Build Real Estate Equity
Investing in real estate builds a borrowable asset base over time. Even starting with a single rental property creates an appreciating asset that you can refinance rather than sell. Over 20 to 30 years, this approach can produce significant tax-free wealth transfers to heirs.
What Experts and Studies Say
Academic and financial research consistently supports the core logic of this strategy. Several key findings are worth noting.
Liscow and Fox’s 2025 study found that the wealthiest Americans’ primary tax strategy is not borrowing but simply holding assets and not selling. This “Buy, Save, Die” approach underlines how powerful the step-up in basis rule is when combined with long-term holding.
The Tax Policy Centre estimates that the step-up in basis costs the U.S. government over $40 billion in annual revenue. This figure illustrates the scale of the tax benefit available to those who hold assets until death.
Research from Vanguard consistently shows that tax drag can cost investors 1% to 2% per year. Over decades, this drag significantly reduces final portfolio values, reinforcing the case for minimising taxable events.
Meanwhile, Morningstar has documented how buy-and-hold investors consistently outperform those who trade frequently. This outperformance comes partly from lower tax friction and partly from avoiding poor market-timing decisions.
A Timeline of Wealth Building with This Strategy
The following table illustrates how the strategy might unfold across different life stages for a diligent investor.
| Life Stage | Age Range | Action | Tax Outcome |
|---|---|---|---|
| Accumulation | 25-40 | Buy index funds, real estate, and max retirement accounts | Tax-deferred growth; no capital gains events |
| Growth | 40-55 | Continue building; explore SBLOC or HELOC access | Borrow against assets; no tax on loan proceeds |
| Peak borrowing | 55-70 | Use credit lines for lifestyle or further investment | Zero capital gains; assets continue compounding |
| Estate planning | 65+ | Work with attorneys; establish trusts; review beneficiaries | Minimise estate tax exposure; plan step-up benefit |
| Transfer | At death | Heirs inherit at stepped-up basis | All unrealised capital gains permanently eliminated |
This timeline shows why starting early matters so much. The longer assets compound without being sold, the greater the eventual benefit. Even modest beginnings at age 25 can grow into substantial, tax-efficient wealth by retirement age.
Common Myths About This Strategy
Myth 1: It is only for billionaires. False. While the full strategy works best at high net worth levels, elements such as holding long-term, using HELOCs, and maximising retirement accounts are accessible to ordinary investors.
Myth 2: It is illegal or a loophole. False. Every element of this strategy operates within existing tax law. The step-up in basis and the non-taxable nature of loans are explicit features of the tax code, not exploits.
Myth 3: It works without professional help. False. Proper implementation requires collaboration with financial advisors, tax attorneys, and estate planners. Going it alone risks costly mistakes.
Myth 4: The loans are free money. False. Interest accumulates on all borrowed amounts. If asset values fall and a margin call is triggered, the consequences can be severe. Disciplined borrowing is essential.
Myth 5: Heirs pay no taxes. False. Heirs avoid capital gains tax through the step-up in basis, but estate taxes may still apply to large inheritances. Additionally, if heirs sell inherited assets after the date of death, they owe capital gains tax on any appreciation occurring after they inherited.
Alternatives and Complementary Strategies
Buy, Borrow, Die does not exist in isolation. Several complementary approaches can enhance its effectiveness or serve as alternatives for investors not yet ready for leveraged strategies.
Qualified Opportunity Zone investments allow investors to defer capital gains by reinvesting proceeds into designated low-income areas. Gains held for at least 10 years in these funds may be partially or fully excluded from tax.
Charitable Remainder Trusts (CRTs) allow donors to transfer appreciated assets into a trust, receive an income stream for life, and pass remaining assets to charity, all while avoiding immediate capital gains tax.
Donor-Advised Funds (DAFs) allow investors to donate appreciated assets, receive an immediate tax deduction, and recommend grants to charities over time. No capital gains tax is owed on the donated assets.
Irrevocable Life Insurance Trusts (ILITs) can provide liquidity for heirs to pay estate taxes without forcing the sale of other assets, keeping the portfolio intact across generations.
Each of these tools can be layered on top of a Buy, Borrow, Die framework. The result is a comprehensive, multi-layered strategy that maximises wealth preservation and transfer.
The Future of This Strategy
As wealth inequality draws increasing political attention, the legal landscape around Buy, Borrow, Die could change. Several proposals have been put forward in Congress to limit or eliminate the step-up in basis. Others have proposed marking unrealised gains to market annually, creating a tax bill even without a sale.
None of these proposals has yet become law as of 2026. However, the political environment suggests that major reform remains possible. Investors who rely heavily on the step-up in basis should maintain diversified estate planning strategies that can adapt to changing rules.
Meanwhile, new financial products continue to emerge. Crypto-backed lending is growing rapidly. Fintech platforms are making borrowing against portfolios more accessible to retail investors. These trends suggest that the core principles of Buy, Borrow, Die will remain relevant even as specific tools and rules evolve.
Ultimately, the most durable version of this strategy is the simplest one: buy quality assets, hold them for a long time, minimise unnecessary sales, and plan your estate thoughtfully. These principles are unlikely to go out of style regardless of what happens to any specific tax rule.
Summary: Key Takeaways
Loans are not income. Borrowing against assets does not trigger a taxable event. This distinction is fundamental to the entire strategy.
The step-up in basis eliminates lifetime gains at death. This rule effectively erases decades of appreciation from the tax record when assets pass to heirs.
Compounding is most powerful when uninterrupted. Every sale breaks the compounding chain and removes capital from the market. Avoiding unnecessary sales maximises long-term wealth.
Risk management is essential. Borrowing against assets introduces leverage, and leverage amplifies both gains and losses. Conservative LTV ratios and cash reserves are critical safeguards.
Professional guidance is not optional. The complexity of tax law, estate planning, and lending arrangements makes expert advice essential for anyone pursuing this strategy seriously.
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Disclaimer
The information in this article is provided for general educational purposes only. It does not constitute financial, legal, or tax advice. Tax laws change frequently, and individual circumstances vary widely. Always consult a qualified financial advisor, tax professional, or attorney before making any financial or estate planning decisions. The author and publisher accept no liability for actions taken based on this content.
References
[1] E. J. McCaffery, “A New Understanding of Tax,” Michigan Law Review, 1990s.
[2] Z. Liscow and J. Fox, “Borrow-Until-You-Die? The Tax Planning of the Ultra-Wealthy,” 2025. [Online]. Available: https://taxproject.org/buy-borrow-die/
[3] ProPublica, “The Secret IRS Files,” 2021. [Online]. Available: https://www.propublica.org/article/the-secret-irs-files
[4] Internal Revenue Service, “Publication 559 – Survivors, Executors, and Administrators,” IRS.gov. [Online]. Available: https://www.irs.gov/publications/p559
[5] Internal Revenue Service, “Topic No. 409 – Capital Gains and Losses,” IRS.gov. [Online]. Available: https://www.irs.gov/taxtopics/tc409
[6] Instead.com, “Buy, Borrow, Die Strategy Explained for 2026,” 2026. [Online]. Available: https://www.instead.com/resources/blog/buy-borrow-die-strategy-explained-for-2026
[7] Asset Strategy, “Buy, Borrow, Die,” Asset Strategy Wealth Management. [Online]. Available: https://assetstrategy.com/buy-borrow-die-blog
[8] CoinRabbit, “Buy, Borrow, Die Strategy Explained: A Tax-Efficient Way to Use Capital,” CoinRabbit Blog. [Online]. Available: https://coinrabbit.io/blog/buy-borrow-die-strategy-explained-a-tax-efficient-way-to-use-capital
[9] Tax Policy Centre, “Step-Up in Basis,” Urban-Brookings Tax Policy Centre. [Online]. Available: https://www.taxpolicycenter.org/
[10] Cornell Law School, “IRC Section 1014 – Basis of Property Acquired from a Decedent,” Legal Information Institute. [Online]. Available: https://www.law.cornell.edu/uscode/text/26/1014
