Buy Borrow Die Strategy in Canada: How It Works and What the CRA Can Actually Do

You accumulate appreciating assets, typically publicly traded securities or private company shares, inside a holding company or personally. You then borrow against those assets through a securities-backed line of credit or a Lombard-style loan from a Canadian or foreign private bank, paying interest rather than triggering a taxable disposition. The borrowed cash funds your lifestyle, your next investment, or both. Because Canada taxes capital gains only on realization, not accrual, the gain sits untouched inside the asset until you choose to sell or until you die.

Canada's deemed disposition rule treats death as a sale of all capital property at fair market value, which is the primary obstacle the strategy must solve. The two main tools are a spousal rollover, which defers the deemed disposition until the surviving spouse dies, and a pipeline transaction, which converts accrued capital gains inside a corporation into a tax-free return of capital over a 12-to-24-month wind-down after death. Holding assets inside an Alberta or British Columbia unlimited liability company (ULC) layered under a US structure can add further deferral for cross-border estates. A full breakdown of what the CRA can and cannot challenge in these structures is here.

Most Canadian practitioners run this strategy through a holding company rather than personally, because the holdco creates an additional buffer between the asset, the loan, and the individual's tax profile. The holdco borrows against its portfolio, pays deductible interest, and retains the principal inside the company at the lower small-business or general corporate rate rather than the top personal marginal rate. On death, the estate owns shares of the holdco rather than the underlying assets directly, which enables the pipeline transaction and keeps the capital gain deferred. Setup costs for a basic Ontario or BC holding company with a shareholder loan structure run roughly CAD 2,500 to CAD 5,000 in legal and accounting fees.

The major Canadian private banks and wealth divisions that offer pledged-asset lending include RBC Dominion Securities, TD Wealth Private Investment Advice, and BMO Private Banking, all of which will extend a securities-backed line against a diversified equity portfolio above roughly CAD 2 million. For larger or more concentrated positions, National Bank Financial and CIBC Wood Gundy will lend against a single-stock pledge with a haircut. Foreign options include interactive brokers' portfolio margin product and Swiss private banks such as Pictet or Julius Baer for clients with offshore-held assets, where the loan never touches Canadian soil and generates no Canadian-source interest income.

The CRA's primary avenue of attack is the general anti-avoidance rule (GAAR), which requires the agency to show that a transaction was an avoidance transaction and that it produced a misuse or abuse of the Act. Pure borrowing against an appreciated asset is not an avoidance transaction because no provision of the Act is engaged, there is no disposition and no deduction being claimed. Where the CRA has successfully applied GAAR is in aggressive pipeline transactions completed within weeks of death, or in situations where the shareholder loan was never intended to be repaid. A properly documented, commercially rational loan with a real repayment schedule and arms-length interest rate is very difficult for the CRA to unwind.

Incorporate the holdco first, transfer assets by way of a section 85 rollover election to move appreciated property without triggering immediate gain, then establish the pledged-asset credit facility with the holdco as borrower and the portfolio as collateral. Document the shareholder loan or inter-company loan terms in writing with a fixed repayment schedule and a commercially defensible interest rate, currently at least the CRA's prescribed rate of 5% for intra-family loans. Review the structure after any significant change in portfolio concentration, a death in the family, or a change in the capital gains inclusion rate, all three of which have occurred or are occurring in Canada between 2023 and 2025.