How the Ultra-Rich Avoid Taxes: The Buy, Borrow, Die Strategy
You might’ve heard whispers about the “Buy, Borrow, Die” strategy. Sounds like something only billionaires in boardrooms talk about, right? But it’s not. It’s a perfectly legal play hiding in plain sight, used by people who know exactly how to bend the tax code without breaking it.
While most people grind for decades, taxed on every paycheck, the ultra-rich figured out how to sidestep the taxman entirely. They buy assets, borrow against them tax-free, and when the time comes, they die in a way that erases whatever taxes are left.
In this article, I’m breaking it down step by step. You’ll see how the game is rigged in their favor, how they keep wealth growing while paying little to nothing in taxes, and how you can start thinking differently about wealth and taxes.
Curious how they pull it off? Keep reading.
Table of Contents
Why the Rich Don’t Get Taxed Like You
Let’s get something straight. If you’re working a regular job, every dollar you earn gets hit by taxes before it lands in your bank account. You grind, you get taxed. But for the ultra-rich, it’s a different ballgame. They don’t live off paychecks, they live off wealth.
And wealth, unlike wages, doesn’t get taxed until you sell. Now, imagine you’ve got a million in stocks sitting pretty. As long as you don’t sell, the IRS can’t touch those unrealized gains.
Instead of cashing out and triggering taxes, you leave the assets alone and let them grow, while you find another way to fund your lifestyle tax-free. That’s the difference, the rich don’t let taxes dictate how they live.
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Setting the Foundation: The Irrevocable Trust
Here’s where it all starts, you set up an irrevocable trust. Think of this as your family’s financial foundation. Let’s say you own a $5M stock portfolio. Instead of keeping it in your name, you move it into the trust.
The key move here is that once it’s in, it’s no longer part of your personal estate. That means when you pass on, the IRS can’t come clawing at it for estate taxes.
But here’s the best part: even though you technically don’t “own” the assets anymore, you can still control how they’re used, thanks to trustees and other tools. It’s like giving up ownership on paper but keeping the benefits in practice.
That’s how the rich keep their fortunes shielded generation after generation.
Note: with an irrevocable trust, you relinquish both ownership and control to the trustee. You can influence the trust’s terms when setting it up (e.g., appointing trustees or defining beneficiaries), but you cannot directly manage the assets afterward without risking tax consequences or violating the trust’s legal structure.
The IRS could challenge this if you retain too much control, potentially reclassifying it as part of your estate.
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Buying Smart: Assets That Keep Growing
Once your trust is in place, you need to fill it with something worth keeping. Picture yourself scooping up $10M worth of stocks, real estate, or even private companies.
But you’re not flipping these for quick profits, you’re holding long-term. Why? Because these assets will grow and compound, and you won’t owe a dime in taxes until you sell. Which, spoiler alert, you don’t.
Instead of sweating over cutting back every coffee or coupon, you let your assets do the heavy lifting while they quietly appreciate in value. It’s not about being cheap, it’s about owning things that quietly build serious wealth without Uncle Sam knocking at your door.
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Borrowing Against Wealth: Tax-Free Living
Now here’s where things get fun. Picture your $10M in assets has grown to $20M over a few years. You could sell and pocket the cash, but then Uncle Sam shows up, hand out, ready to take his cut.
Instead, you walk into a bank, show them your $20M portfolio, and borrow against it. They’re happy to hand you a $10M loan at a low interest rate, because your assets are top-tier collateral.
That loan? Not taxable. You use it to buy houses, fund your life, invest in more assets, you name it. You’re living large, tax-free, while your assets keep compounding quietly in the background. No taxable event, no stress, just smart leverage.
It is worth noting that for personal lifestyle spending you’d pay interest with after-tax dollars. So there is some tax liability here, but nowhere near as much as liquidating assets that have appreciated.s
How You Handle the Loan: Staying in Control
At this point, you’re probably wondering, how do you keep up with the loan payments without selling off your golden goose? Easy. You’ve got options. Let’s say your portfolio throws off dividends. You can use those.
Maybe you’ve got rental income flowing in, royalties stacking up, or tax-free municipal bond interest. You’re not scrambling to pay the interest, you’ve structured everything so cash keeps flowing in without setting off taxable events.
And if you ever feel like peeling off a small piece and paying a minimal tax, that’s still on your terms. You’re in control, always.
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The Power Move: Swapping Assets to Keep Flexibility
Here’s a little-known trick the ultra-rich use: asset substitution. Imagine you’re holding $50M worth of appreciating stock in your trust. You’ve borrowed against it, lived well, but now you want to shuffle things around without paying taxes.
You can swap out some of that stock for cash or other assets, maybe even the same cash you borrowed earlier. This keeps the liability and asset sides balanced while giving you flexibility without triggering any taxable sale.
Think of it like rearranging chess pieces while the other player doesn’t even realize the board’s changed. It’s the quiet power move that keeps everything running smoothly.
Swapping assets typically requires trustee approval and must align with the trust’s terms. If done improperly (e.g., swapping for personal benefit), it could be deemed a taxable distribution or a breach of fiduciary duty. So this is another grey area strategy.
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Death: Where the Tax Bill Magically Disappears
Now comes the part no one talks about at dinner, the dying part. But financially, this is the moment everything clicks. Let’s say you’ve borrowed $50M and still hold $50M in assets when you die.
Here’s the kicker: your estate gets to deduct that $50M debt, wiping out the taxable estate. The estate tax? Gone. But it gets better. Your heirs inherit the assets at the current market value thanks to something called a step-up in basis.
That means if they sell the assets right after, they owe zero in capital gains tax. It’s like hitting reset on the taxes, generation after generation.
Note, the debt doesn’t “wipe out” the taxable estate—it reduces it. If the estate’s value exceeds the federal exemption (e.g., $13.61M in 2025, adjusted annually), estate tax still applies to the excess.
Why Selling Is a Losing Game
Think about this: every time you sell an asset, the IRS is waiting. Sell a stock, sell a building, sell anything, you’re triggering capital gains tax. And if you’re wealthy, that can mean 20% plus an extra 3.8% just because you’re successful.
That’s why the rich avoid selling like it’s poison. Instead, they borrow. Borrowing keeps the asset intact and keeps the taxes at bay. You’re not shrinking your wealth or sending checks to the government every time you need cash.
You’re leveraging what you already own and keeping every dollar working for you.
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Passing the Playbook to the Next Generation
Here’s the part that makes it a dynasty move. After you’re gone, your heirs don’t just inherit the assets, they inherit the playbook. They can set up their own irrevocable trusts, buy more appreciating assets, borrow when needed, and skip the tax headaches.
It’s not just about handing down wealth, it’s handing down the blueprint for how to keep it growing without the taxman knocking. The cycle repeats, wealth stays protected, and taxes stay minimal.
It’s a system designed to run smoothly long after you’re out of the picture.
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Why Most People Can’t Use This (But You Should Still Pay Attention)
I won’t sugarcoat it, this isn’t something you can pull off if you’ve only got a few thousand stashed away. The banks aren’t lining up to give you low-interest loans unless you’re sitting on serious assets.
Plus, setting up trusts and hiring legal pros doesn’t come cheap. But even if you’re not sitting on millions yet, understanding how the game works is half the battle. The key isn’t becoming ultra-wealthy overnight, it’s shifting your mindset.
Start focusing on owning appreciating assets, keeping taxable events to a minimum, and letting compounding do its thing. You might not be in the big leagues yet, but you can play smarter starting today.
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Think Like the Wealthy, Play Smart
So, here’s what you’ve seen, the ultra-rich don’t grind harder, they structure better. They buy appreciating assets, borrow against them tax-free, and set everything up to die without leaving a massive tax bill.
And while most people are busy cutting coupons or getting hit with income tax at every turn, the wealthy are quietly using the rules to their advantage. You don’t have to have millions to start thinking like they do.
Own assets that grow. Avoid unnecessary selling. Understand how the system favors those who play smart, not hard. Because once you get that part down, you’re already ahead.
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