Understanding the American “Buy, Borrow, Die” Wealth Strategy

For decades, America’s wealthiest families have relied on a discreet yet powerful financial formula known as the “buy, borrow, die” strategy—a method designed to preserve and pass down fortunes while minimizing taxes.

Though it might sound like a trick reserved for billionaires, understanding how this works reveals why it has become the cornerstone of generational wealth planning in the United States.

What Is “Buy, Borrow, Die”

The concept, popularized in the 1990s by Professor Edward McCaffery, outlines how the ultra-rich accumulate and maintain wealth using three simple yet strategic steps:

1. Buy – Acquire assets that appreciate over time—think stocks, real estate, or businesses.
2. Borrow – Use those appreciating assets as collateral for loans, funding a lifestyle without selling and triggering capital gains tax.
3. Die –Pass those assets to heirs, who inherit them at their current market value—effectively erasing prior taxable gains through what’s known as a “step-up in basis.”

Freepik | Wealthy families rely on the powerful, decades-old buy, borrow, die formula to pass down fortunes and avoid taxes.

Shaun Moore, tax and financial planning expert at Quilter, explains, “The process allows individuals to access liquidity without selling investments, while heirs receive the assets at a reset value, wiping out capital gains liabilities.”

This financial loop has quietly fueled generational wealth in America for years, with each stage intentionally designed to keep money compounding and taxes minimized.

How the “Buy, Borrow, Die” Tactic Works in Practice

The strategy revolves around leveraging growth and avoiding taxable events for as long as possible.

Buy: Wealthy individuals begin by purchasing appreciating assets. David Little, partner at Evelyn Partners, notes that in both the U.S. and the U.K., capital gains tax applies only when an asset is sold. By simply holding onto investments, the paper gains continue to grow untaxed, creating exponential compounding.

Borrow: Once the asset’s value increases, the owner borrows against it. Loans are not taxable income, so this provides a tax-efficient cash flow. As Little explains, “The ultra-rich enjoy extremely low interest rates—often below the growth rate of their assets—making borrowing an attractive way to fund spending while keeping investments intact.”

Die: Upon death, U.S. heirs benefit from the step-up in basis rule, which resets the inherited asset’s tax value to its current market price. “The gain is simply wiped on death,” Little says.

“Buy, Borrow, Die” in the U.S.

Consider an American investor named Alice who purchased $500,000 worth of shares in 2000. By 2025, those shares are worth $10 million. Selling would create a $2.25 million federal capital gains tax bill. Instead, Alice borrows $5 million against her shares—tax-free—and uses the funds for her lifestyle.

When Alice dies, her heirs inherit the shares valued at $10 million. They can sell them immediately without any capital gains tax, thanks to the step-up in basis. Since her total estate falls under the $13.99 million federal exemption, there’s no estate tax either. The heirs receive the full $10 million untaxed.

Could the Same Strategy Work in the U.K.?

While the idea seems attractive, using the “buy, borrow, die” strategy in the U.K. is much more complex. The inheritance tax (IHT) applies a 40% charge on estates worth more than £325,000. There’s an additional £175,000 allowance for homes passed to direct descendants.

Shaun Moore explains that borrowing against assets does not count as taxable income, and capital gains tax is still cleared at death. However, inheritance tax continues to be a major obstacle. Even after deducting debts, the total tax bill can still be high.

If Alice lived in the U.K., her heirs would receive her £10 million in shares rebased to their market value. They would still owe around £4 million in inheritance tax, leaving them with roughly £6 million. Unlike the U.S., the U.K. offers no multi-million-pound exemption for middle-class families, making it harder to pass on wealth tax-free.

Can Leveraging Still Offer an Advantage?

Freepik | Wealthy investors use asset-backed loans to finance purchases, maintain growth, and defer immediate capital gains.

While the full “buy, borrow, die” playbook doesn’t translate neatly under British tax law, borrowing against assets remains a valuable strategy for protecting wealth. High-net-worth individuals often use loans to access liquidity for big purchases or reinvestment opportunities—deferring capital gains while allowing their portfolios to keep compounding.

Private banks typically handle this kind of lending, but it’s a privilege reserved for those with substantial holdings. A portfolio worth at least £1 million is often the entry point.

Could “Sell, Gift, Die” Work Better in the U.K.?

Tax adviser David Little proposes a different route: “sell, gift, die.” The idea is to sell appreciated assets early, pay the 24% capital gains tax, and then gift the proceeds—ideally at least seven years before death—to avoid inheritance tax. But timing is everything. If the donor dies within those seven years, the gift remains taxable, potentially triggering both CGT and IHT.

Given how quickly the rules can get complicated, professional estate planning is essential before attempting such moves.

A Strategy of Wealth and Timing

The “buy, borrow, die” model highlights how timing, leverage, and legal structure work together to protect intergenerational wealth. In the U.S., it remains a favored mechanism among the ultra-wealthy. In the U.K., inheritance tax limits how effectively it can be used, but thoughtful borrowing and well-timed gifting can still meaningfully reduce future tax exposure.

Whether across the Atlantic or closer to home, the lesson is clear—smart financial planning and timing remain the key to keeping wealth within the family.