Buy, Borrow, and Die: How the Ultra-Wealthy Minimize Taxes and Grow Generational Wealth

For many high-net-worth families, building wealth is only half the challenge. Preserving that wealth across generations, while minimizing the drag of taxes, is equally critical. One of the most talked-about strategies among the ultra-rich is known as “Buy, Borrow, and Die.” While the phrase may sound dramatic, it describes a perfectly legal sequence of financial moves that can dramatically reduce taxable income and estate taxes.

Step 1: Buy

The strategy begins with purchasing appreciating assets, such as stocks, real estate, or shares of a closely held business. Instead of focusing on short-term gains, investors target assets that are likely to grow in value over decades.

Key point: Unrealized capital gains, the increase in value of an asset you still hold, are not taxed in the United States.

Step 2: Borrow

Rather than selling those assets to fund their lifestyle, wealthy individuals borrow against their portfolio. Banks happily extend loans at attractive interest rates when the collateral is a diversified, high-value portfolio or prime real estate. Borrowed money isn’t income, so it isn’t subject to income tax. With careful planning, loan interest may even be deductible if the proceeds are used for certain investment purposes.

This borrowing can fund everything from luxury purchases to additional investments, all while allowing the original assets to continue compounding.

Step 3: Die

When the investor eventually passes away, U.S. tax law currently provides a “step-up in basis.” That means heirs inherit the assets at their current market value, not the original purchase price.

Any capital gains that accrued during the owner’s lifetime are effectively wiped out for tax purposes. Heirs who sell immediately would owe little to no capital gains tax.

Benefits and Risks

• Tax deferral: By never realizing gains, investors avoid capital gains taxes during their lives.

• Estate planning advantage: The step-up in basis eliminates decades of appreciation from taxable gain.

• Leverage: Borrowing can enhance returns if invested wisely.

However, this strategy isn’t without challenges:

• Debt management: Over-leveraging can create liquidity problems, especially in market downturns.

• Policy risk: Tax laws can change; proposals to limit the step-up in basis surface regularly.

• Estate taxes: Large estates may still face federal or state estate taxes.

What It Means for High-Net-Worth Individuals

“Buy, Borrow, and Die” is not a shortcut to wealth; it’s a wealth-preservation technique best suited for those with substantial, appreciating assets and access to sophisticated financial planning. For families aiming to create lasting legacies, understanding this framework can be invaluable.

Camikfi Can Help

At Camikfi, we specialize in advanced wealth management and legacy planning for high-net-worth clients. If you’re ready to explore tax-efficient strategies tailored to your goals, contact us for a confidential consultation.

Author: Camikfi Editorial Team

Camikfi LLC: Wealth Management • Insurance • Investment Advising • Financial Planning

Disclaimer: This article is for informational purposes only and does not constitute tax, legal, or investment advice. Always consult a qualified financial planner, tax professional, or attorney before implementing any wealth-management strategy.