For the ultra-wealthy, assets are the lifeblood of a sophisticated, tax-free lifestyle that remains largely out of reach for the average worker. For most citizens in London or New York, tax season is an inescapable reckoning with the state—a percentage of one’s labor surrendered to the public coffer.
But for the ultra-wealthy billionaire class, taxes are often treated as an optional friction, a cost of doing business that can be engineered down to near zero.
The mechanism behind this is not a secret hidden in offshore accounts, but a perfectly legal, three-act play known among wealth managers and tax attorneys as “Buy, Borrow, Die.”
This strategy, popularized in financial circles and explored by outlets like Alux, reveals how the ultra-wealthy live on low-interest loans rather than taxable income.
Act I: Buy — How the Ultra-Wealthy Accumulate Non-Taxable Growth
The strategy begins with the acquisition of appreciating assets. While the middle class derives its wealth from income—salaries that are taxed at the source—the ultra-wealthy focus on capital gains.
Whether it is a tech founder’s original shares, a London real estate portfolio, or a collection of blue-chip art, these assets grow in value every year.
However, under current tax codes, that growth is not “realized.” According to the Internal Revenue Service (IRS), capital gains are only taxed when the asset is sold.
As long as the ultra-wealthy owner does not sell, no tax is owed. They are, on paper, getting richer by the millions while reporting a taxable income that might look like a schoolteacher’s.
Act II: Borrow — Living Off Debt, Not Income
The central tension of being “asset-rich and cash-poor” is solved through the credit markets, a tactic mastered by the ultra-wealthy.
If a billionaire sells $10 million in stock to buy a yacht, they trigger a significant tax bill. In the UK, HMRC guidelines note that residential property gains can be taxed at up to 24%.
Instead, the ultra-wealthy go to a private bank and take out a loan, using their massive portfolio as collateral. Because loan proceeds are not considered “income” by the IRS or HMRC, they receive millions in liquid cash to fund a lavish lifestyle without paying a single cent in income tax.
As detailed in the ProPublica “Secret IRS Files” investigation, many of the ultra-wealthy have paid a “true tax rate” of less than 3% using these methods.
Act III: Die — The Final Erasing of the Debt
The final act is where the magic of estate law occurs for the ultra-wealthy. In the United States, a provision known as the “Step-Up in Basis” allows heirs to inherit assets at their current market value, rather than the price the original owner paid.
The IRS Publication 551 explains how this reset occurs upon death.
If an ultra-wealthy investor bought shares for $1 and died when they were worth $100, the $99 gain simply evaporates for tax purposes. The heirs can then sell the assets to pay off the accumulated loans, and the remaining fortune is passed down tax-free.
In the United Kingdom, while Inheritance Tax (IHT) is more aggressive at 40%, the ultra-wealthy utilize Business Property Relief (BPR) and complex discretionary trusts to shield their estates.
By the time the cycle completes, the state is often left with only a fraction of what would have been owed had the wealth been earned through a paycheck.
The Social Cost of Asset Protection
Critics argue that this cycle creates a “landed gentry” class among the ultra-wealthy that is decoupled from the economic realities of the working population. Economists warn of the widening wealth gap it exacerbates, as the tax burden continues to shift onto wage earners.
“It is a system that taxes work, but rewards wealth,” says one New York-based tax strategist. As long as the “Buy, Borrow, Die” framework remains legal, the ultra-wealthy family office remains the ultimate shield against the fiscal reach of the state.
This article is part of our series on Global Wealth Management. For more information on legal structures, see our guide on How to Protect Your Assets with a Trust: A US Legal Guide
Disclaimer: This article is for informational purposes only. Tax laws are subject to change and vary by jurisdiction.
