Buy, borrow, die is a wealth strategy in which someone buys appreciating assets, borrows against them for spending money instead of selling, and passes the assets to heirs at death — where a “step-up in basis” erases the built-up capital gains. Because loans are not taxable income and unsold assets never trigger capital gains, the approach lets large fortunes fund a lifestyle while paying little or no income tax. It is entirely legal under current U.S. law, and as of July 2026 it is at the center of a live political fight over how the ultra-wealthy are taxed.

The phrase was coined by University of Southern California law professor Edward J. McCaffery in the 1990s to describe, in three words, how the rich get rich and stay that way. Below is a plain-English breakdown of each step, why it works, who it actually helps, and the risks that the marketing rarely mentions.

Key takeaways

  • Buy, borrow, die rests on three real provisions of the U.S. tax code: unrealized gains aren’t taxed, loan proceeds aren’t income, and inherited assets get a stepped-up cost basis at death.
  • Borrowing against assets through a securities-backed line of credit (SBLOC) lets an owner raise cash without selling — and without a capital-gains bill.
  • The “die” step is the linchpin: under IRC Section 1014, heirs inherit at market value, so the lifetime capital gain is wiped out.
  • The strategy is not just for billionaires — it scales down to anyone with a large, appreciated, low-basis position, including long-term stock and bitcoin holders.
  • It also carries real risk: margin calls, rising interest rates, and proposals in 2026 (including from California Governor Gavin Newsom) to curtail it.

What does “buy, borrow, die” actually mean?

The name is a three-step playbook, and each word is a literal instruction.

Buy. Acquire assets that appreciate over time and hold them — stocks, index funds, real estate, private businesses, art, or bitcoin. The key is never selling, because a sale is what triggers a taxable event. As long as the asset is held, its gains are “unrealized” and the IRS collects nothing, no matter how much it grows.

Borrow. When cash is needed, borrow against the appreciated assets rather than selling them. A loan is not income, so the money arrives tax-free. The assets stay invested and keep compounding while serving double duty as collateral.

Die. At death, the assets pass to heirs who receive a “step-up in basis” — their cost basis resets to the market value on the date of death. The lifetime capital gain simply disappears. Heirs can then sell to repay the outstanding loans while owing little or no capital gains tax.

The result is a loop: buy and hold to avoid capital gains, borrow to avoid income tax, and die to erase the tax bill entirely. This is the mechanical core of what wealth advisors mean when they talk about living off assets without ever touching principal — a close cousin of the compounding mindset covered in the numbers the wealthy actually track.

Nothing about the strategy involves a loophole in the sense of an accident or an error. It stacks three long-standing, deliberate features of the Internal Revenue Code.

First, the U.S. taxes realized gains, not paper gains. If you buy a stock at $10 and it rises to $1,000, you owe nothing until you sell. This is by design — taxing unrealized gains annually would force people to sell assets just to pay the tax.

Second, loan proceeds are not income. When a bank lends you money, you have to pay it back, so it isn’t a gain. Borrowing $1 million against a portfolio produces $1 million of spendable cash and a $0 tax bill.

Third, IRC Section 1014 grants a step-up in basis at death. According to the Bipartisan Policy Center, this provision resets an inherited asset’s cost basis to its fair-market value on the date of death, eliminating the deceased owner’s unrealized capital gains for tax purposes. Combine the three and the capital gain that built up over a lifetime is never taxed to anyone.

How the “borrow” step works: SBLOCs and asset-backed lines

The engine of the strategy is the ability to turn assets into cash without a sale. The most common tool is a securities-backed line of credit (SBLOC) — a revolving loan from a brokerage or bank secured by a portfolio of stocks and bonds.

Per explainers from SmartAsset and the Bipartisan Policy Center, SBLOCs are typically offered to clients with sizable portfolios and let borrowers draw a percentage of their holdings’ value — often in the range of 50% to 95% for diversified securities. Because pledging collateral is not a sale, drawing on an SBLOC is not a realization event and triggers no federal tax.

Interest is the catch. SBLOC rates float with benchmark rates, so the cost of the strategy rises and falls with the Federal Reserve. When rates are low, borrowing against assets can be cheaper than the after-tax cost of selling; when rates are high, the math gets tighter. The strategy works best when the expected growth of the underlying assets comfortably exceeds the loan’s interest rate — the same spread-based logic behind how the wealthy use borrowed money to close the gap.

Is bitcoin good collateral for buy, borrow, die?

Increasingly, yes — and the crypto version of the strategy has grown sharply in 2026. The tax logic is identical to an SBLOC: under current U.S. principles, borrowing against bitcoin or ether is generally not a taxable event, because pledging collateral is not a sale. A holder can access liquidity without realizing gains and without giving up future upside.

Crypto-backed lenders typically issue loans at a loan-to-value (LTV) ratio of 25% to 60% of the collateral’s market value — more conservative than SBLOCs, because crypto is far more volatile. That volatility is the whole risk. If the price of the collateral falls below the lender’s threshold and the borrower can’t post more collateral or repay, the lender liquidates the position. The IRS treats that forced sale as a disposition, so a margin call can trigger exactly the capital-gains tax the borrower was trying to avoid — at the worst possible moment.

Two other crypto-specific traps: repaying a loan with appreciated crypto can be treated as a taxable disposition, and defaulting so the lender seizes collateral is also a taxable event. Bitcoin can absolutely play the “buy” and “borrow” roles, but its swings make disciplined LTV and a cash buffer non-negotiable — a discipline theme that runs through the biggest mistake crypto investors make.

Who does buy, borrow, die really work for?

The strategy is often described as a billionaire trick, but the mechanics scale down. Anyone with a large, low-basis, appreciated position — decades of held index funds, founder’s stock, inherited real estate, or early bitcoin — can in principle borrow against it rather than sell.

That said, it is not a free lunch, and its real-world impact is smaller than headlines suggest. The nonpartisan Tax Policy Center found that borrowing against assets accounts for only about 1% to 2% of the economic income of the nation’s richest households. Tax researchers Edward Fox and Zachary Liscow have argued that the ultra-wealthy’s dominant tax advantage is simpler: they just hold appreciating assets and let unrealized gains compound untaxed, without needing to borrow at all. Adam Michel of the Cato Institute has called the borrowing piece a “limited problem,” noting the very rich often consume less than their taxable income in the first place.

In other words, the “buy and hold” and “die” steps do most of the tax-saving work. The “borrow” step matters most for people who are asset-rich but want spending money without selling — a smaller group than the meme implies.

Will buy, borrow, die be banned in 2026?

It is under active political pressure but remains fully legal as of July 2026. On June 26, 2026, California Governor Gavin Newsom used a Substack post to call on Congress to eliminate the strategy, writing that “the wealthy have their own private tax code full of loopholes and exemptions that most people have never heard of.” His push turned “buy, borrow, die” into a national talking point on wealth inequality.

Policy analysts have floated two main fixes. The first is repealing or limiting the step-up in basis, which would tax inherited gains and remove the “die” step’s magic. The second is an excise tax on SBLOCs, which would raise the cost of the “borrow” step directly. The Budget Lab at Yale has published detailed options for reforming the tax treatment of borrowing against appreciated assets. None has become law, and step-up in basis in particular has survived repeal attempts for decades, so anyone building around the strategy should treat the rules as subject to change rather than permanent.

Frequently asked questions

What is the buy, borrow, die strategy in simple terms?

Buy appreciating assets and hold them so you never pay capital gains tax; borrow against those assets when you need cash, because loans aren’t taxable income; and pass the assets to heirs at death, where a step-up in basis erases the built-up gain. The combination lets a fortune fund spending while paying little income tax, legally.

How do the rich borrow against their assets without selling?

They use a securities-backed line of credit (SBLOC) or a similar asset-backed loan. The brokerage or bank lends a percentage of the portfolio’s value — often 50% to 95% for diversified securities — using the assets as collateral. Because pledging collateral is not a sale, no capital gains tax is due, though interest accrues on the loan.

Is borrowing against bitcoin a taxable event?

Generally no. Under current U.S. tax principles, taking a loan against bitcoin or another cryptocurrency is not a sale, so it does not trigger capital gains tax. However, if the collateral is liquidated in a margin call, seized after a default, or the loan is repaid with appreciated crypto, the IRS can treat that as a taxable disposition.

Yes. It relies on well-established provisions of the Internal Revenue Code: unrealized gains aren’t taxed until sale, loan proceeds aren’t income, and inherited assets receive a stepped-up basis under IRC Section 1014. As of July 2026 the strategy is legal, though proposals from figures like California Governor Gavin Newsom aim to curtail it.

What are the risks of buy, borrow, die?

The main risks are a market drop that triggers a margin call and forces a taxable sale, rising interest rates that make the borrowing more expensive than the assets’ growth, and the possibility that Congress changes the rules — for example by repealing step-up in basis or taxing SBLOCs. The strategy only works while asset growth outpaces borrowing costs and the collateral holds its value.

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