The Buy, Borrow, Die Strategy: How the Ultra-Wealthy Avoid Taxes and Build Massive Fortunes

Imagine living a life of luxury—private jets, beachfront villas, and fine dining—without ever paying a dime in taxes on your wealth. It sounds like a fantasy, but for the ultra-wealthy, it’s a reality. They’ve mastered a three-step strategy that allows them to grow their fortunes, live lavishly, and pass on their wealth to future generations, all while sidestepping the taxman. This method is called “buy, borrow, die,” and it’s as powerful as it is controversial.

In this article, we’ll take you behind the curtain of this elite financial playbook. You’ll learn how the rich buy assets that grow in value, borrow against them to fund their lifestyles without triggering taxes, and pass those assets to their heirs with minimal tax liability. But we won’t stop there. We’ll also show you how to adapt these principles to your own life, giving you a fresh perspective on building wealth, minimizing taxes, and securing your financial future. Ready to think like the ultra-wealthy? Let’s dive in.

The Story of John Richman: A Tax-Free Journey

To understand how “buy, borrow, die” works, let’s follow the journey of John Richman—a fictional stand-in for the ultra-wealthy who’ve perfected this strategy.

Step 1: Buy Appreciating Assets

John starts with $1 million, a significant sum but not unreachable for many. He invests it in a promising tech startup. Over the next ten years, the company skyrockets, and his shares balloon to $10 million. Here’s the key: John doesn’t sell. If he did, he’d owe capital gains taxes—currently up to 20% at the federal level in the U.S., plus state taxes—on his $9 million profit. That could mean handing over nearly $2 million to the IRS. Instead, he holds onto his stock, letting his wealth grow quietly while staying off the tax radar.

Step 2: Borrow Against Your Wealth

Now worth $10 million on paper, John wants to enjoy his success—perhaps with a beach house or a yacht. Does he sell his stock? No. Instead, he goes to the bank and uses his $10 million portfolio as collateral for a $5 million loan. The bank, seeing his solid assets, offers a low-interest rate—say, 3%. John spends the loan on whatever he desires, living lavishly without paying a dime in taxes. Why? Because loans aren’t considered taxable income, so the IRS doesn’t touch them. He’s essentially turned his wealth into a cash machine without selling a single share.

Step 3: Die and Pass It On

Decades later, John passes away, leaving his $10 million stock portfolio to his children. Here’s where the strategy reaches its peak: a tax rule called the “stepped-up basis” resets the value of his assets to their worth at the time of his death—$10 million. The $9 million in gains he accumulated over his lifetime? They vanish for tax purposes. His children can sell the stock the next day and owe zero capital gains taxes. Plus, with smart estate planning—think trusts or exemptions (in 2023, the U.S. estate tax only kicks in above $12.92 million per individual)—John’s fortune dodges estate taxes too. His heirs inherit a tax-free windfall.

John Richman lived richly, grew his wealth, and passed it on—all while barely touching the tax system. That’s the power of “buy, borrow, die.”

Breaking Down the Strategy: The Blueprint

Now that you’ve seen the strategy in action, let’s break it down into its three core components. It’s a simple yet brilliant formula that keeps wealth flowing and taxes at bay.

1. Buy Appreciating Assets

The foundation of this method is owning assets that grow in value over time. The wealthy don’t stash their money in savings accounts earning 0.5% interest. They focus on investments with serious growth potential, such as:

• Stocks: Especially in high-growth sectors like technology or healthcare. Think Amazon or Tesla in their early days.
• Real Estate: Properties in booming markets—like San Francisco or Miami—or rental income generators that appreciate over decades.
• Businesses: From small startups to established companies with scaling potential. Owning a piece of a growing enterprise can multiply wealth exponentially.

The trick is to buy and hold. Selling triggers capital gains taxes, but holding defers them indefinitely. It’s like planting a tree and letting it grow without ever chopping it down for firewood. The longer you wait, the taller it gets.

2. Borrow Against Your Assets

Instead of selling their assets and facing a tax hit, the wealthy borrow against them to access cash. Banks love lending to people with valuable collateral—it’s low risk for them—so they offer favorable terms. Here’s why this step is a game-changer:

• Tax-Free Cash: Loans aren’t income under current tax laws, so they’re not taxable. You get money without Uncle Sam taking a cut.
• Flexible Spending: Use the loan to live luxuriously, invest in more assets, or even pay off other debts. It’s your money, tax-free.

Think of your assets as a golden goose. You don’t kill it for the eggs—you borrow against the promise of future eggs. In 2021, for example, the Wall Street Journal reported that billionaires like Elon Musk have used billions in stock loans to fund their lifestyles, all without triggering taxable events.

3. Die and Pass It On

The final act seals the deal. When you pass away, your heirs benefit from two key tax advantages:

• Stepped-Up Basis: Under U.S. tax law, the value of your assets is reset to their market value at your death. If you bought stock for $1 million and it’s worth $10 million when you die, your heirs inherit it at $10 million. The $9 million gain? Erased from the tax books.
• Estate Tax Planning: With the right moves—like setting up trusts or leveraging the 2023 estate tax exemption of $12.92 million per person—most or all of your wealth can transfer tax-free.

Your fortune slides to the next generation with little to no tax burden. It’s a legacy on autopilot, preserving wealth across centuries.

How You Can Apply It: Wealth-Building for the Rest of Us

“Great,” you might be thinking, “but I’m not sitting on $10 million in tech stocks. How does this help me?” Here’s the secret: you don’t need billions to use these principles. You can adapt them to your own financial situation—starting today. Let’s explore how.

1. Buy Appreciating Assets

You don’t need a tech startup or a Manhattan penthouse. There are accessible options for regular folks:

• Index Funds: Invest as little as $50 a month in a low-cost fund tracking the S&P 500. Historically, it’s returned about 10% annually before inflation. Over 30 years, $100 monthly could grow to over $200,000. Hold it, don’t sell it.
• Real Estate: Can’t afford a skyscraper? Start with a small rental property, a fixer-upper, or even a duplex. A $150,000 home that appreciates 3% yearly could double in value in 24 years, all while you collect rent.
• Retirement Accounts: Max out a Roth IRA ($6,500 annual limit in 2023). Your gains grow tax-free, and some plans allow penalty-free withdrawals or loans for big expenses like a home.

The key is to start small and let time work its magic. Wealth compounds—patience is your ally.

2. Borrow Wisely

Borrowing isn’t just for billionaires. You have options too, if you use them carefully:

• Home Equity Loans: Own a home? A HELOC (home equity line of credit) lets you tap its value at rates often below 5%. Use it to invest or cover emergencies, not to splurge.
• Margin Loans: Some brokerage accounts let you borrow against your investments—say, 50% of your portfolio’s value. It’s riskier, but manageable with discipline.
• Smart Credit Use: A 0% APR credit card can give you short-term cash flow for a big purchase. Pay it off before interest hits, and it’s free money.

The golden rule? Borrow only what you can handle. Debt is a tool, not a trap. Overextend yourself, and you’re in trouble.

3. Plan for the Future

You don’t need a dynasty to think ahead. Simple steps can secure your legacy:

• Wills and Trusts: A basic will costs under $100 online; a simple trust might be $1,000 with a lawyer. They reduce taxes and hassles for your heirs.
• Life Insurance: A $500,000 term policy could cost $20 monthly for a healthy 30-year-old. It covers debts or taxes, leaving your family secure.

Think of it as planting seeds for your loved ones—or your favorite charity. It’s not about millions; it’s about intention.

The Risks and Ethical Shadows: The Full Picture

Before you dive in, it’s crucial to see the whole picture—both the risks and the moral questions this strategy raises.

The Risks

This isn’t a foolproof plan. Here are the pitfalls to watch for:

• Over-Borrowing: If your assets tank—like during the 2008 crash—you could owe more than they’re worth. Imagine borrowing $50,000 against a $100,000 portfolio, then watching it drop to $40,000. The bank still wants its $50,000.
• Interest Rate Spikes: Loans at 3% today could jump to 7% tomorrow if rates rise, eating into your wealth. The Fed’s hikes in 2022 reminded us: rates aren’t static.
• Law Changes: Politicians are eyeing these loopholes. Proposals to tax unrealized gains or cap the stepped-up basis could unravel the strategy overnight.

The Ethical Debate

This isn’t just about money—it’s about fairness and society:

• Fairness: The wealthy use these tactics to avoid taxes, while average earners pay 20-30% of their income. In 2021, ProPublica found the 25 richest Americans paid a “true tax rate” of just 3.4% on their wealth growth. Is that equitable?
• Responsibility: Should billionaires fund public goods like schools and roads, or is it their right to keep their wealth? Critics call it exploitation; defenders say it’s smart planning.

The strategy works because the system allows it. Whether that’s right is up to you to decide.

Your Next Step: Think Like the Elite

The “buy, borrow, die” strategy isn’t a magic trick—it’s a mindset. It’s about growing wealth patiently, using debt strategically, and planning for the long term. You may not dodge taxes like a billionaire, but you can still win at your own game.

Here’s your action plan to get started:

• Invest Today: Open a brokerage account and invest $100 in an index fund. It’s a small step toward big growth.
• Borrow Smart: Research a HELOC or margin loan. Read the fine print and weigh the risks before you commit.
• Plan Your Legacy: Write a will this month. It’s not morbid—it’s empowering.

The ultra-wealthy didn’t build their fortunes by accident. They played the long game, and now you know their moves. What’s yours?