Buy, Borrow, Die: How the Ultra-Wealthy Avoid Taxes

Buy, borrow, die is how the ultra-wealthy spend fortunes while paying very little income tax. They buy assets and hold them, so gains are never taxed as income. They borrow against those assets for cash, and a loan is not taxable income. When they die, a rule called stepped-up basis wipes the built-up gains off the books for their heirs. It is real, and it is legal. But the honest data show the rich lean on it less than the story implies.

Most people are taught to build money for one lifetime. The ultra-wealthy play a different game, and most of their playbook is written right into the tax code. What they really have that you do not is someone who explained it to them. Let me be that person. This guide covers one piece: how the rich keep their tax bill so low. It answers that question and stays in its lane.

The strategy works only when the asset, loan, and tax rules all hold up.

The engine: buy, borrow, die

This three-word strategy is the core of how the richest Americans spend while paying little tax. In 2021, ProPublica reported that the 25 richest Americans paid what it called a "true tax rate" of about 3.4 percent on the growth of their wealth from 2014 to 2018.[1] That figure compares taxes paid to how much their fortunes grew, not to their reported income, but it captures the effect.[7] Here is the machine, step by step.

Buy

They buy assets that grow in value and produce little taxable income: stocks, index funds, real estate, businesses. Then they hold. Selling triggers capital gains tax, so they do not sell. The gains just compound, untouched, year after year.

Borrow

When they need cash, they do not sell. They borrow against their assets, often through a securities-backed line of credit (SBLOC) or a margin loan.[2] A loan is not income, so there is no income tax on the money they spend. They get cash while the assets keep growing. It is not free money, though. The loan charges interest, and if the assets fall, the lender can force a sale at the worst time.[2]

Die

This is the masterstroke, and it is pure tax code. Under Internal Revenue Code Section 1014, when you die, your heirs inherit your assets at a "stepped-up basis."[3] The cost basis resets to the market value on the date of death. The gain that built up during your life disappears for tax purposes. As an illustrative example, buy a building for 1 million dollars, hold it until it is worth 2.5 million, and your heirs can sell at 2.5 million owing no capital gains tax on that lifetime growth.[3]

So the machine is: buy and never sell, borrow to spend, then pass assets on with the gains wiped clean. It is baked into the law.

The honest part most posts skip

I promised straight talk, so here are two caveats the hype crowd leaves out.

Boundary | What can break
Asset value. | A drop can reduce collateral and force a sale.
Loan terms. | Rates can rise and lenders can change collateral demands.
Cash flow. | Interest must be paid or added to the growing debt.
Tax law. | Basis and estate rules can change before death.
Estate plan. | Ownership, debt, and beneficiary terms must work together.

The very rich borrow less than the story implies. The Tax Policy Center looked at the data and found that while buy, borrow, die is a real loophole, most ultra-wealthy households are mostly saving, not borrowing to live.[4] Their yearly borrowing came to only about 1 to 2 percent of their income, while their untaxed gains were tens of times larger.[4] The headline cases with a 3 percent tax rate are real but extreme, not the everyday norm. The Federal Reserve's Survey of Consumer Finances shows the same pattern: wealthy households hold most of their money in appreciating assets, not idle cash.[8] The lesson is not "just borrow forever." The lesson is simpler: do not trigger taxes you do not have to, and let compounding run.

Stepped-up basis is a policy target. As of 2026 it is still in the tax code, but lawmakers have repeatedly proposed ending it.[5] It is not guaranteed forever, so good plans stay flexible.

Where trusts fit

The wealthy often do not own assets in their own name. They place them in trusts to control how the money is used and to shield it from estate tax at each generation. That is its own topic with its own tradeoffs. I cover it in plain English, including revocable versus irrevocable and whether you even need one, in revocable vs. irrevocable trust.

Where life insurance fits

Life insurance is the piece of this playbook that scales down to a normal family. A death benefit is generally income-tax-free, and the cash value can be borrowed against, which is a small-scale version of the same borrow step.[6] That is the whole idea behind the Rockefeller method, which I break down in how the rich use life insurance.

What actually scales down to you

Here is the honest line between "marketing" and "real." Some of this needs serious wealth. A lot of it does not.

The strategy | Who can use it | The real version for you
Hold, do not sell | Everyone | Buy-and-hold index investing is the buy step. You already have access.
Borrow instead of selling | Most homeowners and investors | A home equity line or a securities-backed loan. Smaller scale, same principle, same risks.
Stepped-up basis | Everyone with assets | Automatic under the tax code. Hold appreciated assets to pass on.
Basic will and trust | Everyone | Avoids probate and controls distribution. Affordable and worth doing.
Cash-value life insurance | Most working families | A properly built policy scales down. The real entry point.
Dynasty trusts | Higher net worth | Genuinely needs real assets and a good attorney. Not for everyone yet.

The real edge is not a product. It is the time horizon. Wealthy families think in generations, not paychecks. That mindset, and how any family can start it, is the bigger picture in how to build generational wealth. Before you act on any of this, it is smart to run questions to ask a financial advisor.

Common questions

Is buy, borrow, die real?

Yes. Each step is real and legal: hold assets so gains are not taxed, borrow against them for cash, and pass them on at a stepped-up basis.[1][3] The honest caveat is that the richest borrow less than the story suggests; accumulating untaxed gains, not borrowing, is their main move.[4]

Is buy, borrow, die legal?

Yes. Holding assets, borrowing against them, and inheriting at a stepped-up basis are all allowed under current tax law.[3] It is tax avoidance, which is legal, not tax evasion, which is not. Stepped-up basis is written into Internal Revenue Code Section 1014, though lawmakers have proposed ending it.[3][5]

Does buy, borrow, die actually work?

It works at the top, where people have huge, appreciated assets and cheap credit. Even there, the data show it is a smaller part of the picture than the headlines imply.[4] The underlying principles, hold appreciating assets and avoid needless taxes, work at any income level. The exotic loan-against-stock version mostly does not fit an ordinary budget.

How do the rich avoid taxes?

Mostly by not selling. Gains are not taxed until you sell, so unrealized gains compound untaxed for years.[4] They borrow against assets for tax-free cash, use trusts to limit estate tax, and pass assets on at a stepped-up basis.[3] Some of that scales down to you; the extreme borrowing usually does not.

This is general education, not tax, legal, or investment advice. Trusts and estate strategies require a qualified estate attorney and tax professional. Tax rules, including stepped-up basis and estate exemptions, are current as of 2026 and can change. I am a licensed insurance and financial professional, and I can be paid when someone buys a policy. I say so because knowing how your advisor is paid is part of judging any advice, including mine. Review your specific situation with qualified professionals before acting.

Sources

ProPublica, "The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax". Accessed July 27, 2026.

FINRA, "Securities-Backed Lines of Credit Explained". Accessed July 27, 2026.

Legal Information Institute, 26 U.S. Code § 1014 (basis of property acquired from a decedent). Accessed July 27, 2026.

Tax Policy Center, "The Rich's Real Tax Trick Isn't 'Buy, Borrow, Die'". Accessed July 27, 2026.

Internal Revenue Service, "Estate Tax". Accessed July 27, 2026.

Legal Information Institute, 26 U.S. Code § 101 (certain death benefits). Accessed July 27, 2026.

ProPublica, "How We Calculated the True Tax Rates of the Wealthiest". Accessed July 27, 2026.

Board of Governors of the Federal Reserve System, Survey of Consumer Finances (SCF). Accessed July 27, 2026.