What is the “Buy, Borrow, Die” strategy? “Buy, Borrow, Die” is a wealth-preservation framework where you buy compounding assets, borrow against their value to access cash tax-free, and hold them until death. At death, your heirs receive a stepped-up cost basis that eliminates your built-in federal capital gains taxes.
Step-by-step breakdown
- Buy. Acquire high-quality, appreciating assets that can serve as loan collateral, such as real estate, private business equity, or index funds. The goal is to accumulate substantial unrealized gains without selling and triggering a tax event.
- Borrow. Instead of selling to raise cash, take a loan secured by your portfolio, structured as a securities-backed line of credit (SBLOC), a margin loan, or a home equity line. Because loan proceeds are not taxable income, you receive liquidity with zero tax liability while your portfolio keeps compounding.
- Die. Your heirs inherit the assets with a stepped-up cost basis under Internal Revenue Code Section 1014, which resets the basis to fair market value on your date of death and erases your lifetime of built-in gains. The estate can then sell a portion tax-free to pay off the loans, leaving the rest to your heirs with a fresh, high basis.
The math of borrowing: a worked example
Consider an investor holding a $5 million stock portfolio with a $1 million cost basis, representing $4 million in unrealized gains.
- Scenario A: selling for cash. To access $1 million, the investor sells part of the portfolio, triggering a capital gains event. At top federal rates (20% capital gains plus 3.8% NIIT), the tax on those gains is a significant out-of-pocket cost.
- Scenario B: borrowing against the portfolio. The investor takes a $1 million line of credit secured by the stock and receives the full $1 million with zero immediate tax. They pay interest, but the entire $5 million portfolio keeps compounding. At death, the heirs receive the stepped-up basis, the estate repays the loan, and the remaining assets transfer with no capital gains tax due.
Risks and limitations to consider
The strategy is effective, but it carries real risks that must be managed:
- Interest-rate fluctuations. Borrowing is not free. If rates rise or exceed your portfolio’s returns, the cost of carrying the debt can outweigh the taxes you are deferring.
- Margin-call risk. Borrow against volatile assets and a sharp market decline can trigger a margin call, forcing you to liquidate at the bottom and realize the very gains you aimed to avoid.
- Federal estate tax. A step-up eliminates capital gains tax, but large estates may still owe federal estate tax. In 2026, the exemption sits at roughly $15 million per individual, so larger portfolios must plan around that threshold.
- Reduced flexibility. Assets locked as collateral limit your ability to rebalance, leaving you concentrated in specific positions.
Is this strategy right for you?
Buy, Borrow, Die is best suited to individuals with large, low-basis, highly appreciated assets and reliable cash flow to service interest. It is a specialized framework that must be modeled carefully against your cash-flow needs, tax brackets, and long-term estate plans.
