Buy Borrow Die Strategy Example: Real Numbers, Real Structures

An investor buys $10 million of Apple stock in 2010. By 2024 that position is worth $80 million. Selling triggers roughly $16.8 million in federal long-term capital gains tax at the 23.8% top rate. Instead, the investor pledges the shares to a private bank, such as Julius Baer or UBS, and draws a Lombard loan at 50-60% LTV, receiving $40-48 million in cash at roughly 5-6% interest. No sale occurs, no gain is recognized, and the loan proceeds are not income under US tax law.

The third leg of the strategy is what converts tax deferral into permanent elimination. Under IRC Section 1014, heirs inherit assets at fair market value on the date of death, not at the original purchase price. In the Apple example, heirs inherit the $80 million position with an $80 million basis. They can immediately sell, repay the outstanding loan balance, and pocket the remainder with zero capital gains tax on the historical appreciation. The original $70 million gain disappears entirely.

Real estate owners run the same play with an additional lever. An investor acquires a $5 million commercial property, refinances repeatedly as values rise, pulling out cash at 65-70% LTV each cycle. Annual depreciation deductions shelter rental income, often producing a paper loss against other income. At death, heirs inherit the property at stepped-up basis, eliminating all deferred depreciation recapture and capital gains simultaneously. This is the structure behind many multigenerational real estate dynasties across Texas, California, and Florida.

Founders of private companies face the same problem without a liquid public market, but solutions exist. A founder holding $50 million in private company equity can use a Securities-Based Line of Credit from a bank willing to lend against unregistered shares, typically at 30-40% LTV given illiquidity, or structure a GRAT (Grantor Retained Annuity Trust) that passes future appreciation to heirs with minimal gift tax. Some founders use combination structures: a GRAT transfers appreciated shares out of the estate, and a subsequent Lombard loan against the shares in trust provides liquidity. Detailed examples of how ultra-wealthy founders layer these tools show the structures in granular form.

The strategy is not cost-free. Interest on the Lombard loan runs 5-7% per year in the current rate environment, and that cost compounds over decades. The math works as long as the underlying asset appreciates faster than the loan interest rate. A position growing at 10% per year while borrowing costs run 6% produces a 4% net advantage plus permanent tax elimination at death. The strategy breaks down if the asset declines sharply, triggering a margin call that forces a taxable sale at the worst moment. Concentration in a single position is the most common failure point, and private banks will call loans with little warning during volatile markets.

US persons executing buy borrow die onshore get the step-up benefit automatically under federal law, but state-level estate taxes in Massachusetts, Oregon, and Washington can still erode the outcome. Domicile in a no-estate-tax state such as Florida, Texas, or Nevada preserves the full federal benefit. Non-US persons can hold appreciated assets inside a foreign holding company, borrow against the portfolio through a Swiss or Singapore private bank, and face no US estate tax if structured correctly before acquiring US situs assets. Singapore and Switzerland are the two most commonly used banking jurisdictions for this lending relationship at the $10 million and above level.