Buy, borrow, die describes three steps: buy assets that appreciate, borrow against them for spending in place of selling, and hold them until death, when heirs generally receive them with a tax basis reset to market value. It is legal and widely discussed. What makes it work in practice is how the borrowing is chosen and managed: the rate, the collateral behind each loan, and the plan for each payment.
The strategy has three steps
Buy. You hold assets that appreciate: shares, a business, real estate. Under current law a gain is taxed when the asset is sold, not while it grows.
Borrow. When you need cash, you borrow against the assets and leave them invested. Loan proceeds are not income, because they have to be repaid.
Die. The people who inherit your property generally take it with a basis equal to its fair market value at the date of death. IRS Publication 551 states the rule. The gain that built up during your life is then never subject to income tax. Assets you give away during life are treated differently: the recipient keeps your basis.
A plain illustration. You own shares that cost $1,000,000 and are now worth $6,000,000. To raise $1,000,000 by selling, you realize about $833,000 of gain. At the top federal long-term rate of 20% plus the 3.8% net investment income tax, that is about $198,000 of federal tax, before any state tax. Borrow the $1,000,000 and there is no tax today. There is interest every year.
What the borrowing involves
The strategy has a carrying cost, and managing it is most of the work.
- Interest. At an illustrative 6%, a $1,000,000 loan costs $60,000 a year. Over 25 years that is $1,500,000 if you pay it as you go, and more if it is added to the loan. The trade works when the assets you kept earn more than the loan costs over the whole period, which is the comparison to run before borrowing.
- Deductions. Interest on money borrowed for personal spending is generally not deductible. Home mortgage interest is deductible, if you itemize, on the first $750,000 of debt used to buy, build or substantially improve the home, for loans taken out after December 15, 2017. The treatment depends on the case.
- The estate tax is separate. The step-up is an income tax rule. The federal estate tax is figured on the fair market value of what you own at death. For deaths in 2026 the filing threshold is $15,000,000 per person.
- Repayment at the end. The step-up does not cancel the debt. The estate repays every loan, usually by selling assets at their new basis, and heirs receive what is left.
A securities-backed line is tied to the market
Most descriptions of the strategy assume the borrowing is a line of credit against a portfolio. FINRA’s investor guidance sets out how such a line behaves.
| Feature | How it works |
|---|---|
| Maintenance requirement | Often called a margin call. If pledged securities fall far enough, the lender requires more collateral or repayment, typically within two or three days, and can sell securities to meet it. |
| Demand feature | Securities-backed lines are classified as demand loans. The lender may call the loan at any time. |
| Rate | Usually variable, set from a benchmark such as prime or SOFR plus a spread, and able to change daily. |
| Concentration | A portfolio dominated by one stock can reach its collateral threshold on a single piece of news. |
These features are managed the same way: borrow well inside the limit, and keep the loan small against the assets behind it. FINRA suggests asking who the lender is, what happens if the value of the portfolio falls, how the person offering the line is paid, and whether you can move your account to another firm while the line is open. The distance between what you owe and what the lender allows is your margin.
The step-up is current law, with a history
The step-up is current law, and it has been revisited. According to the Congressional Research Service, Congress replaced it with carryover basis in 1976, then repealed that change in 1980 before it took effect. For deaths in 2010, executors could choose between the estate tax and carryover basis. Proposals to tax gains at death date back to 1963 and have come from administrations of both parties.
A long plan is stronger when it works on its own cash flows and treats the step-up as an addition.
There are three ways to borrow
| Tool | What secures it | How it behaves | What is managed |
|---|---|---|---|
| Securities-backed line of credit, which some firms call a pledged asset line | A pledged investment account | Revolving, interest-only and usually variable-rate. A typical agreement lends 50% to 95% of the account’s value, depending on the assets. The money cannot be used to buy securities. | The loan against the account’s market value |
| Interest-only mortgage | The home | Interest only for a set period, then principal and interest over the remaining term | The source of the later payment |
| Policy loan | The cash value of a life insurance policy | Borrowed from the insurer. Interest accrues, and the balance is settled from the death benefit. | The loan against the policy’s value, reviewed every year |
A mortgage differs from the first in one important way. It is term debt with a payment schedule. Under a standard mortgage, a fall in the home’s market value does not by itself trigger a call for more collateral, the way a fall in a pledged portfolio does. For the structure in detail, see interest-only jumbo mortgages.
That makes the home a natural place for the long-term borrowing in a plan. The payments are known in advance, so their source can be planned in advance.
Where a primary residence fits
A home is an appreciating asset that you live in and cannot sell in pieces. It fits the strategy at three points.
At purchase. Paying cash for a $4,000,000 home means finding $4,000,000, often by selling appreciated assets and paying tax on the gain. Financing 80% leaves $3,200,000 of those assets in place. That is the borrow step, applied on the first day. At an assumed 6.1%, the rate used in this site’s reference case, the interest is $16,266.67 a month on an interest-only basis. Interest on the first $750,000 of that debt is potentially deductible. We compare the two routes in paying cash versus financing a luxury home.
During ownership. If you sell your main home, you may exclude up to $250,000 of gain, or $500,000 on a joint return, if you meet the ownership and use tests. On a home at this price, long-term appreciation can run well past that. Holding the home until death generally brings the same basis step-up that applies to securities.
At the end of the interest-only period. This is the point to plan. An interest-only mortgage schedules its principal for the later years, and the payment steps up when amortization begins. In the reference case it goes from $16,266.67 to $27,176.61 a month in year 16, an increase of about 67%. The usual answers are to refinance, to sell assets, or to draw on a securities-backed line. Each depends on conditions at that time: rates, markets and your own income.
A mortgage can be paired with a funded policy
There is a fourth answer, and it is the one this site describes. The Family Office Mortgage pairs the interest-only mortgage with a separately funded indexed universal life policy, with a bank financing part of the policy’s premiums. Projected policy cash, taken as policy loans or withdrawals, is designed to fund the payments from year 16 through year 30. The source of the later payment is set at purchase.
In buy, borrow, die terms, it adds a second asset to borrow against, the policy. It also adds a second leg to the last step: life insurance proceeds paid because of the insured’s death are generally not included in the beneficiary’s income.
Where The Family Office Mortgage fits
It is a way to plan the year-16 payment at the time of purchase, so that it does not rest on a future refinancing. How the program works gives the full sequence.
In the reference case for a $4M home, you commit $2,000,000 at the start: $800,000 down and $1,200,000 to the policy. You pay $16,266.67 a month, interest only, for fifteen years. From year 16, projected policy cash of $370,000 a year is designed to fund scheduled mortgage payments of $326,119 a year.
The principle that protects a securities-backed line, margin, is built into this plan as well. Policy cash could come in 10% lower than illustrated, at $333,000 a year, and still cover every mortgage payment.
The rest is management, and it is the reason the team matters. Every transaction is underwritten by the team before it is proposed. Each case is modeled under a conservative risk profile and run through simulations across many market paths. After closing, policy values, the bank loan and the collateral are reviewed every year against the plan, so adjustments are made early. The team has done hundreds of transactions, and your own CPA and attorney review the proposal before anything is signed.
If your household holds $5M or more and you are weighing cash against financing, see the comparison or run your own price. Then read how the risks are managed, how premium financing works and the guide to indexed universal life.
