What is Risks & Considerations?

- Market downturn → margin calls, forced liquidation - Rising interest rates → increased borrowing costs - Legislative risk → stepped-up basis could be eliminated - Concentration risk → borrowed against a single position - Not available to most taxpayers (requires significant assets)

Finance Maxxing

Wiki/Borrowing & Leverage

Borrowing & Leverage

Buy-Borrow-Die Strategy

Borrow against appreciated assets to avoid capital gains; basis steps up at death.

The "Buy-Borrow-Die" strategy is a wealth preservation approach used by high-net-worth individuals.

The Three Steps

1. Buy

Accumulate appreciated assets (stocks, real estate, businesses). Don't sell — unrealized gains are not taxed.

2. Borrow

Instead of selling, borrow against the appreciated assets:

Margin loans (5.5%–12%)
Box spreads (~4%–5.5%)
Pledged asset lines (5%–8%)
Proceeds are not taxable income

3. Die

At death, assets receive a stepped-up basis to fair market value:

All unrealized capital gains are permanently eliminated
Heirs inherit at current value with zero embedded gain
Loan is repaid from estate (or heirs sell assets with stepped-up basis)

The Math

	Sell to Spend	Borrow to Spend
Asset value	$1,000,000	$1,000,000
Cost basis	$200,000	$200,000
Capital gains tax (23.8%)	$190,400	$0
Borrowing cost (5% × 1 year)	—	$50,000
After-tax cost of interest	—	~$27,500 (if deductible)
Net cost	$190,400	$27,500–$50,000