Some of the wealthiest Americans use a strategy called Buy, Borrow, Die to dramatically reduce their tax bills while their fortunes continue to grow. This video is part of ProPublica’s series, “The Secret IRS Files” which reveals, using a trove of never-before-seen records, how the wealthiest avoid income tax. Read the series: …(read more)

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Buy, Borrow, Die: How America’s Ultrawealthy Stay That Way

The concept of “Buy, Borrow, Die” has been gaining attention and sparking conversation in the world of finance and wealth management. It refers to the strategy employed by some of America’s ultrawealthy individuals to maintain and grow their riches across generations. This strategy involves buying assets, leveraging those assets through borrowing, and eventually passing them on to heirs without triggering hefty estate taxes, all while maintaining a lavish lifestyle.

The first step in the “Buy, Borrow, Die” strategy is to acquire valuable assets such as real estate, stocks, and business interests. The ultrawealthy often use their existing wealth to make these purchases, and they choose assets that have the potential for long-term growth and appreciation. By investing in these assets, they can enjoy the benefits of ownership, such as rental income from real estate or dividends from stocks.

Once the assets are acquired, the ultrawealthy leverage them by borrowing against their value. This allows them to access additional funds without having to sell off their assets, which can trigger capital gains taxes. By using the assets as collateral, they can secure loans with favorable terms and low interest rates. The borrowed funds can then be used for personal expenses, business investments, or additional asset acquisitions.

The final step in the “Buy, Borrow, Die” strategy involves passing on the assets to heirs in a tax-efficient manner. By holding onto the assets and using leverage to access funds, the ultrawealthy are able to maintain their lifestyle without depleting the value of their estates. When they eventually pass away, the assets are transferred to their heirs, often without estate taxes due to the step-up in basis at the time of death. This allows the next generation to inherit a substantial amount of wealth without the burden of hefty taxes.

While the “Buy, Borrow, Die” strategy has been effective for some of America’s ultrawealthy, it is not without its risks and challenges. Market downturns, interest rate fluctuations, and unexpected expenses can all impact the success of this strategy. Additionally, the use of leverage introduces a level of risk that requires careful management and monitoring.

Critics of the strategy argue that it perpetuates inequality and allows the ultrawealthy to avoid their fair share of taxes. The use of leverage and estate planning techniques can also be complex and require professional guidance, which may not be accessible to everyone.

The “Buy, Borrow, Die” strategy has shed light on the ways in which the ultrawealthy manage and maintain their riches. It has also sparked discussions about tax policy, wealth inequality, and the role of financial planning in building and preserving wealth.

Ultimately, the “Buy, Borrow, Die” strategy serves as a reminder of the complex and ever-evolving nature of wealth management for the ultrawealthy. It also prompts consideration of the broader implications and societal impact of the strategies employed by the wealthiest individuals in America.