Compare selling appreciated assets to fund spending vs. borrowing against them — and see the after-tax wealth difference at death.
About the Buy, Borrow, Die calculator
Buy, Borrow, Die is how the ultra-wealthy access appreciated assets without paying capital gains tax. Instead of selling stock to fund spending — triggering federal capital gains tax on each sale — they borrow against the portfolio through a Portfolio Asset Line (PAL) or margin loan. The loan accrues interest, but the assets keep compounding on their full value. At death, heirs inherit at a stepped-up cost basis — resetting it to current market value — sell enough to repay the loans, and owe no capital gains tax on decades of appreciation. The strategy wins when your portfolio's after-tax return exceeds the loan interest rate, and when enough unrealized gain exists that the annual tax drag on selling meaningfully erodes your portfolio.
Frequently asked questions
When does Buy, Borrow, Die stop making financial sense?
When your loan interest rate approaches or exceeds your expected portfolio return. If you're borrowing at 5% and the portfolio earns 5%, the loan consumes all gains while the portfolio grows no faster than the debt. The strategy also breaks down if your loan-to-value ratio climbs past the lender's threshold (typically 50–70%), triggering a margin call that forces a taxable sale at the worst possible time.
What is a stepped-up cost basis?
When you inherit an asset, the IRS resets your cost basis to the market value at the date of the original owner's death — not what they originally paid. If they bought stock for $50,000 that grew to $2 million, your inherited basis is $2 million. Selling it immediately generates zero capital gains tax. This step-up permanently erases embedded gains, which is the mechanism that makes the borrow strategy work at death.
What is a Portfolio Asset Line (PAL)?
A secured line of credit from a brokerage or private bank that lets you borrow against your investment portfolio without selling securities. PALs typically carry lower rates than unsecured debt and require no monthly payments — interest accrues and rolls into the loan. The catch: if the portfolio drops sharply and the LTV limit is breached, the lender can force sales of your securities to restore the ratio.
Does this strategy work at a $2 million portfolio?
Mathematically yes, but the practical advantages shrink at smaller scales. PAL rates at $2M are higher than what $10M+ clients receive. The strategy also requires a long enough horizon that loan interest doesn't outpace the tax savings. For most people in the $2–5M range, a low-turnover index strategy with tax-loss harvesting captures much of the benefit without the margin-call risk.