Have you ever looked at headlines about billionaires paying almost nothing in tax and wondered what they know that you donโt? The answer isnโt some secret offshore account or shady accountant. Itโs a straightforward strategy that wealthy people have used for generations, hiding in plain sight within the American tax code. Itโs called Buy Borrow Die.
This tax planning strategy sounds morbid, sure. But the name describes exactly how the strategy works, and once you understand it, youโll see why the wealthiest families in the world treat it like gospel.
What Exactly is the Buy Borrow Die Strategy?
The Buy Borrow Die approach is a three-part wealth management method, sometimes called the die method, that allows families to grow their net worth, access cash when they need it, and pass everything to their heirs with minimal tax liability. When families buy assets that appreciate and hold them long-term, they can reduce their tax burden substantially over time.
Hereโs the basic framework. You buy appreciating assets. You hold them. When you need money, you borrow against those assets rather than selling them. When you pass away, your heirs receive a step-up in basis that essentially wipes out the tax bill on decades of gains.
Edward McCaffery, a law professor at the University of Southern California, coined the term in the mid-1990s to help students understand how wealthy people navigate taxation. He wasnโt revealing some underground loophole. He was describing the logical outcome of how the tax system already operates.
The strategy involves three distinct phases, and each one matters.
Phase One: Buy Assets That Appreciate
The first step is to buy appreciating assets. Stock. Real estate. Art. Private equity. Digital assets. The type matters less than the trajectory. You want things that grow in value over time without generating taxable income along the way.
When you hold assets that appreciate, you donโt pay taxes on those gains until you sell. This is called unrealized appreciation, and itโs the foundation of the entire die strategy. A stock portfolio might double, triple, or increase in value tenfold over your lifetime, and as long as you never sell, you never trigger capital gains tax.
Wealthy people understand this intuitively. Thatโs why they hold onto their stock positions for decades. Thatโs why they collect art that sits in warehouses. The assets grow, the tax bill stays at zero.
Hereโs where it gets interesting for families building generational wealth. The longer you hold, the more your portfolio compounds. And the more it compounds, the larger the eventual tax-free benefit becomes for your heirs.
โThe wealthy never sell appreciating assets. They borrow against them, use the money for more income-producing assets, and let time do the heavy lifting. It sounds almost too simple, but thatโs exactly why it works.โ
โ Jake Claver, CEO, Digital Ascension Group
Phase Two: Borrow Against Assets
So youโve got millions in stock or real estate. But you need cash to buy a house, fund a business, or just live your life. Selling would mean paying capital gains tax, potentially 20% at the federal level plus state taxes. In California, you could lose nearly half your gains. Instead, you borrow.
Securities-based lending, a line of credit against your portfolio, home equity loans, even specialized products like art-backed loans all allow you to borrow money using your assets as collateral. The loan gives you cash, but because debt isnโt income, thereโs no taxable event.
Think about how this changes everything. You never have to sell the stock. You access the liquidity you need. And your assets continue to appreciate in the background while you use the borrowed funds for whatever you want.
The interest rate on these loans matters, of course. But historically, interest rates have been low enough that the cost of borrowing is a fraction of what youโd lose to taxes by selling. Even with rates climbing, the math usually works. Borrow at 7% or pay 40% in taxes? The choice is obvious.
When you borrow against their assets, wealthy families also protect their portfolios from forced liquidation during market downturns. If you need cash during a crash and youโre forced to sell, you crystallize losses and might never recover. But if you borrow against the assets and wait, the market rebounds and your wealth stays intact.
Some families use a line of credit against their stock holdings to fund everything from business acquisitions to lifestyle expenses. Others borrow against real estate through HELOCs. More recently, families with significant digital asset holdings have started using collateralized loans against cryptocurrency positions.
The wealthy donโt borrow recklessly, though. Responsible loan-to-value ratios, typically between 20% and 50%, prevent margin calls from forcing asset sales. They cover interest payments from income or, in some cases, from additional borrowing. The goal is to never sell the appreciating assets, ever.
Phase Three: Die and Pass Assets to Heirs
Hereโs where the strategy earns its name.
When you pass away holding appreciated assets, something remarkable happens. Your heirs receive whatโs called a step-up in basis. The cost basis of those assets resets to the fair market value at the time of your death.
Let me give you a concrete example. You bought stock at $10 per share thirty years ago. When you die, itโs worth $500 per share. Under normal circumstances, selling that stock would trigger capital gains tax on the $490 gain. But because of the step-up, your heirs receive the stock with a $500 basis. If they sell immediately, they pay nothing. The lifetime of appreciation passes completely tax free.
Any outstanding loans get paid off from the estate, often from life insurance proceeds or liquidating a small portion of assets. The heirs receive the remaining wealth without the tax burden.
The step-up in basis is one of the most powerful provisions in tax law. Itโs why wealthy families focus so intensely on holding assets until death rather than selling during their lifetimes. The tax savings compound across generations.
Estate tax can still apply if your net worth exceeds the lifetime exemption, which currently sits around $14 million per person or $28 million for married couples. But proper estate plan structures, like trusts and strategic gifting, can reduce your overall tax burden further.
Why This Tax-Avoidance Strategy Works
The Buy Borrow Die method isnโt about cheating the system. Itโs about understanding how the tax code treats different activities.
Selling assets triggers capital gains tax. Borrowing against assets does not. Passing assets at death triggers a step-up in basis. These arenโt loopholes. Theyโre features of American tax law that have existed for decades. This is how you grow your wealth while avoiding taxes on assets during your lifetime.
When you combine all three elements, you create a cycle where wealth grows continuously, gets accessed through debt, and transfers to the next generation without the tax penalty that would normally destroy accumulated gains. The tax advantages compound over time. Each generation that follows the pattern adds more appreciation, more tax-deferred growth, and more wealth that eventually passes through the step-up. This is exactly how generational wealth gets built and preserved.
How to Avoid Capital Gains Taxes Using This Approach
The die approach lets families avoid capital gains taxes legally and permanently. Instead of recognizing gains during your lifetime, you defer them indefinitely. Then the step-up wipes the slate clean for your heirs. The key is discipline. You have to resist the urge to sell when markets spike. In addition, you have to structure your borrowing carefully so youโre not overleveraged and plan your estate so that outstanding loans donโt consume all the wealth youโve built. When you do pay back the loan, you can use income from other sources or refinance at better terms. Proper structure lets you reduce your taxes legally across multiple generations.
Families who avoid paying taxes this way arenโt doing anything illegal. Theyโre just playing by rules that most people donโt understand.
Consider how Jeff Bezos or Elon Musk access cash. They donโt sell billions in stock and pay capital gains. They borrow against it. When Elon bought Twitter, he used loans secured by his Tesla and SpaceX holdings. He didnโt liquidate. He didnโt pay taxes on those shares. He borrowed and bought. The same approach applies whether youโre working with $50 million or $50 billion. The scale changes but the principle doesnโt.
Practical Considerations for Tax Planning
This strategy used by the wealthy requires professional guidance. Tax professionals, estate planning attorneys, and tax advisors who understand the nuances can help you structure everything correctly. Youโll want to hold assets inside the right entities. Many families use LLCs to segregate holdings from personal liability while maintaining flexibility. The LLC provides protection and makes it easier to borrow against assets at institutional rates.
For those with substantial portfolios, private placement life insurance offers another layer of tax benefits. PPLI lets you hold appreciating assets inside a policy, borrow against the cash value tax-free, and pass the death benefit to your heirs receive without income tax implications.
The loan mechanics matter too. Pay back the loan interest regularly to avoid compounding debt problems. Some families set up annuities funded by borrowed proceeds to cover the interest payments automatically. Others use reinsurance policies to pay off outstanding loans if something happens before they can refinance. Reduce your overall tax picture by combining this strategy with other legitimate approaches. Charitable giving, qualified opportunity zones, and proper income tax rate management all play roles.
Who Can Actually Use The Buy, Borrow, Die Strategy?
The Buy Borrow Die method scales to different wealth levels, though it works best for people with significant holdings in appreciating assets.
You donโt need to be a billionaire. Someone with a $2 million stock portfolio can borrow against it for a home purchase instead of selling and paying capital gains. A family with appreciated real estate can use those assets to pay for education or start a business without triggering a taxable event.
Digital assets present new opportunities too. Families holding substantial cryptocurrency positions can now use institutional custody solutions that allow borrowing against Bitcoin, XRP, or other holdings. The same principles apply. Rather than selling and paying capital gains tax at your income tax rate, you borrow and let the assets continue to appreciate.
The minimum threshold depends on lenders. Most securities-based lending products require at least $100,000 to $500,000 in portfolio value. Real estate lending obviously depends on property values. Digital asset lending varies by platform and custody arrangement.
The Risks You Need to Understand in the Buy, Borrow, Die Strategy
Nothing is without risk. If your assets depreciate significantly while you have loans outstanding, you could face margin calls or forced liquidation. This would trigger capital gains tax at the worst possible time, when your portfolio is down. Interest payments add up. If you borrow $1 million at 7% interest, youโre paying $70,000 annually just to service the debt. That money has to come from somewhere.
The tax code could change. Proposals to eliminate or modify the step-up in basis surface periodically. If that provision disappears, the entire strategy loses its most powerful element. Estate tax exemptions fluctuate too. The current $14 million exemption is historically high. Future administrations could lower it substantially, which would expose more estates to taxation. Finally, complexity creates its own problems. Poor structuring, inadequate documentation, or aggressive tactics can attract IRS scrutiny. Work with professionals who understand how to minimize the tax burden legally.
Why the Rich Avoid Taxes While Everyone Else Pays
Tax inequality stems partly from strategies like this one. The American tax system taxes income more heavily than wealth. If you earn money through wages, you pay taxes immediately. If you earn money through asset appreciation, you pay nothing until you sell. This tax reduction approach benefits those who can afford to wait.
Wealthy people donโt need to sell. They borrow against their wealth without creating income, using those assets as collateral for essentially unlimited liquidity. The system rewards holding and penalizes working.
Understanding how the rich avoid taxes isnโt about envy. Itโs about learning how the rules actually work. Anyone with appreciating assets can apply at least some of these principles.
What Digital Ascension Group Has Seen
At Digital Ascension Group, weโve worked with families navigating this exact approach with digital assets. One family held a significant position in cryptocurrency that had appreciated dramatically from their original purchase. They needed capital for a business expansion but couldnโt stomach the tax bill from selling. We connected them with institutional custody partners who could hold their assets securely while providing access to a line of credit. They borrowed what they needed at reasonable rates, funded their business, and kept their crypto intact. The appreciation continued. No tax event occurred.
When they eventually pass those assets to their children, the step-up in basis will reset everything. Decades of gains, transferred without capital gains taxation. Thatโs the power of understanding how to use those assets properly within an estate plan that accounts for digital holdings.
Building Wealth Without Selling Your Assets
The Buy Borrow Die strategy isnโt complicated. Itโs just different from how most people think about money. Most of us were taught to save, invest, and eventually sell to fund retirement or big purchases. But selling triggers taxes that compound over a lifetime. Wealthy families flip that script. They hold forever, borrow when needed and pass assets at death with the tax slate wiped clean for the next generation. The tax benefits accumulate quietly year after year. Appreciation builds untaxed. Liquidity comes through debt. Generational wealth transfers through the step-up provision. You can build wealth without constantly paying the government a cut of every gain, access your money without selling what youโve worked to accumulate and pass everything to your heirs without the tax burden destroying half of what youโve built.
Taking the Next Step
Want to understand how these principles might apply to your situation? Digital Ascension Group works with families across wealth levels to structure holdings, plan estates, and navigate the increasingly complex world of both traditional and digital assets. We donโt offer investment advice or manage your money. But we can connect you with the right tax professionals, estate planners, and custody solutions to implement strategies like this properly.
Contact Digital Ascension Group to start the conversation.
The Strategy That Builds Dynasties
Hereโs what most people miss about generational wealth. It isnโt built through spectacular trades or perfect timing. Itโs built through patience, structure, and understanding how the system actually works. The Buy Borrow Die method has helped families preserve and grow fortunes across multiple generations. Itโs legal. Itโs documented. And itโs available to anyone willing to learn the rules and play by them. The wealthiest families already know this. Now you do too.
