Financial hack: The buy, borrow and die strategy

Franklin Izuchukwu

The current disparity between the middle and upper class Americans elicites many opinions; there is a need to re-examine the buy, borrow and die strategy used by wealthy Americans to remain ultra-rich.

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Ever heard of the phrase 'The rich keeps getting richer and the poor, even poorer? The saying has been confirmed for ages, where the economy has always favoured the rich and left out individuals below the food chain.

The level of income inequality in America and the world at large has been alarming. It has left many craving for a change in the status quo.

This article only seeks to examine the economic situations in the United States of America. America is home to 724 billionaires, with 8 of the top 10 wealthiest people in the world living in the country, yet it is home to over 750,000 living without a home.

The above may be possible because America champions itself as a beacon of hope and freedom or the laxity to tax the 'uber' wealthy Americans.

The question is, what method has the ultra-rich in America employed to maximise their wealth and remain rich? The buy, borrow and die strategy is a coined phrase explaining how the rich in America have perfected paying less or no income tax at all.

The buy, borrow and die strategy effectively maintains the generational wealth and transfers it to the family heirs. The process allows the wealthy:

  • To buy into investments,
  • Borrow against these investments
  • Then die and leave massive wealth for their heirs.

An Expose by ProPublica in June 2021 showed that the richest Americans gets off with legally not paying federal income tax. Jeff Bezos, the richest man, paid no income tax in 2007 and 2011, same with Elon Musk.

The report also showed the same path Mike Bloomberg and George Soros; they all amassed significant amounts of wealth while paying zero dollars in federal income taxes.

The rich Americans play on a different pitch, the buy, borrow and die strategy makes staying rich seem easy and simple. The rich in America use two loopholes in the American tax code to put the buy, borrow and dies strategy in play:

  • Unrealized Gains are only taxed when sold

    Profits made from appreciating assets are not taxed unless sold; the owner controls when and how to be taxed.

  • Tax Mercy at death

    After death, the supposed tax on gains from appreciating assets is forgiven (Stepped-Up basis). For instance, if an asset appreciates from 10 USD to 100 USD; after the investor's death, the realized 90 USD gain is not taxed when transferred to the heirs.

Friendly Quote:

“Once you’re already rich, it’s simple, it’s easy. It’s just buy, borrow, die. These are planks of the law that have been in place for 100 years.” — USC law professor Edward McCaffery

1. Buy

The first step to the buy, borrow and die strategy is to buy an asset. The goal here is to buy assets that appreciate, like real estate or stocks.

The catch is, the investor must buy a high-value appreciating asset with a huge lump of money - that is the advantage the wealthy Americans hold over the middle-class.

It is notably hard for the middle-class to save up a large sum of money over a short period of time from their income because this income is taxed before they even receive it, unlike the wealthy, who have millions sitting around.

Some estimates broadly invested assets provide over 3% yearly returns, thus with 2 million USD, over 60,000 USD is expected as annual returns. A bigger investment with at least 10 million USD will give about 300,000 USD per year.

The values are more than the median household income of Americans, which is estimated at 67,521 USD. Such value makes it harder for everyday Americans to participate in the buy, borrow and die scheme.

The best asset to buy for the buy, borrow and die strategy to work is real estate because:

  • It is less volatile than stocks
  • Usually trends upwards
  • can be easily used as collateral for bank loans.

It is predicted that banks will almost always take real estate as collateral rather than stakes in a company or other asset. In summary, the goal here is to buy a less volatile but appreciating asset.

The current taxation system and loop holes in America has created more disparity between the upper and middle-class Americans.

2. Borrow

The next item on the Die, Borrow and Die strategy list is Borrowing money from creditors like banks, etc.

It is not wise to sell these appreciating assets to get cash because that will trigger a taxable event and the goal here is to stay rich and pay less or no taxes altogether.

To be cash fluid, invest in other businesses and live their luxury lifestyle, the rich investor would rather borrow from banks using his appreciating assets as collateral.

One of the few advantages here is, the government does not require taxes on loans. The investor can pay back using proceeds from other divested businesses or keep borrowing the rest of his life as long as his assets appreciate value.

Borrowing against these assets is less costly than taxation on the sale of an asset. The interest rate in the USA has been low over the years, thus making borrowing a very profitable venture for the wealthy.

Banks are in the business of savings for the middle-class, but the rich know far too well that banks thrive on borrowing and are much happier to permit such events as long as there are assets to back it up. Shockingly, there are lower interest rates for higher amounts of loans.

3. Die

The last piece of the puzzle is what happens when the investor dies. At some point, the Investor will die and leave his estate and other assets to be inherited by the heirs.

The stepped-up basis tax loophole goes into effect on death as the heirs inherit these assets. To explain further, the basis is the initial value of the asset.

Capital gains taxes are implemented on any value above the basis (when the assets are sold); however, after death, there are no capital gains taxes as the heirs inherit and sell off these assets because, at death, the value is stepped-up to the initial value (basis).

In essence, the dead investor or his heirs ended up paying no taxes with the buy, borrow and die strategy. The heirs could sell off the assets to pay off the loans. The heirs could use the remainder to start up the buy, borrow and die scheme again (it is a cycle).


In hindsight, the buy, borrow and die strategy would only work if the principal investor dies and if the stepped-up basis loophole remains in the tax code.

The assets in question also need to increase in value faster than the banks' interest rates.

It may not be the most strategic way of buying assets, but it shows the existing loophole in the American economic system; it prompts the question of when would equity overtake inequality in the USA?