The 1%'s "Buy, Borrow, Die" Secret to Tax-Free Millions

The "Buy, Borrow, Die" strategy is a popular tax avoidance method used by many wealthy individuals.

This strategy allows the rich to minimize their tax burden while still enjoying their wealth.

The process begins with buying assets that are expected to appreciate over time, such as stocks, crypto, or real estate.

These assets are held for long periods, allowing their value to grow substantially.

What is the "Buy, Borrow, Die" Strategy?

Wealthy individuals borrow against their assets instead of selling them. Selling would incur capital gains taxes.

Banks and lenders are often willing to lend money at low interest rates when valuable assets are used as collateral.

This borrowed money can be used for living expenses or further investments, all while avoiding income tax.

This works great in a low interest rate environment when borrowing costs are low.

The key is that loans are not considered taxable income by the IRS.

When the individual passes away, their heirs inherit the assets with a stepped-up basis.

This means the heirs' cost basis for the inherited assets is their fair market value at the time of inheritance, not the original purchase price.

As a result, a significant portion of the asset's appreciation escapes capital gains tax entirely.

The strategy lets the rich live off their assets. They pay no taxes on the appreciation.

This loophole has become increasingly controversial as wealth inequality continues to grow.

Critics argue that it allows the ultra-rich to avoid paying their fair share of taxes.

Proponents claim it encourages long-term investment and economic growth.

How Can You Implement This Strategy?

The "Buy" part of the strategy involves acquiring assets that are likely to increase in value over time.

These could include stocks, crypto, bonds, real estate, or even valuable art collections.

The goal is to build a portfolio of assets that will appreciate significantly over decades.

Do you know how to choose these assets? Join our community of investors where we discuss these types of matters.

The "Borrow" phase comes into play when the individual needs cash for living expenses or new investments.

Instead of selling assets and triggering taxes, they use their appreciated assets as collateral to take out loans.

These loans often come with very favorable terms due to the high value of the collateral.

The borrowed money can be used for anything from daily expenses to funding new business ventures.

These loans are not considered income by the IRS and are therefore not taxed.

The "Die" part of the strategy refers to what happens when the individual passes away.

At this point, the assets are passed on to heirs with a stepped-up basis.

If the heirs sell the inherited assets, they owe capital gains tax only on any appreciation since inheriting them.

All the appreciation that occurred during the original owner's lifetime essentially becomes tax-free.

This strategy has been used by many billionaires and ultra-wealthy individuals to great effect.

It allows them to live luxurious lifestyles while paying minimal income tax.

Some argue that this strategy is simply smart financial planning within the bounds of existing tax law.

Others view it as an unfair loophole that exacerbates wealth inequality.

There have been proposals to close this loophole, such as implementing a wealth tax or changing inheritance tax laws.

However, such changes face significant political challenges and opposition from wealthy interest groups.

Understanding this strategy is important for investors like you and policymakers alike.

It also sheds light on how the tax system can be used to preserve and grow wealth over generations.

There is ongoing debate in financial and political circles about this loophole's future.

As always, you should consult your advisors before applying this strategy on your portfolio.

They can help with how it might apply to your situation.

The "Buy, Borrow, Die" shows the benefits it offers to the very wealthy, and that can be also used by you.

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