“Buy-borrow-die": The 3-step wealth strategy explained

Are you thinking of launching a new business, but you need capital to move forward? Or perhaps you’ve found the perfect property to expand your real estate empire, but you lack the liquidity to secure it. For investors with substantial investment portfolios, selling their holdings often comes to mind as an obvious solution to raising cash – but is it the most strategic decision?

If selling would mean a sizable capital gains tax bill – or force you to exit positions you’d prefer to keep – then maybe not. You might want to instead consider a “buy-borrow-die” planning approach, which can help you potentially save on capital gains taxes and quickly access the liquidity you need through strategic investing and planning.

This strategy may make sense if you’ve built up a large investment account outside of retirement plans, especially if your investments have grown a lot and selling would trigger a big tax bill. But if your investments are more concentrated or volatile, you might need to sell soon or your finances are tight – then this approach may not be for you. It’s usually best for those who need cash for near-term needs or goals, but don’t want to give up their long-term investments – and who have enough income or savings to keep up with loan payments if markets get bumpy.

This approach typically involves three steps:

By borrowing against your portfolio, you may be able to preserve more of your wealth. Read on to learn more about how this strategy works, as well as its potential benefits and risks.

The potential benefits of borrowing against your investment portfolio

Investors may have portfolios with large, unrealized gains, meaning their investments are worth more than what they paid. Selling those assets may trigger capital gains tax; in 2026, this can be as high as 20% for single filers with taxable incomes greater than $545,500 or married joint filers with taxable incomes greater than $613,700. Some investors may also be subject to an additional 3.8% net investment income tax.

Acquiring cash through borrowing against an investment portfolio can be used for a variety of financial goals, including:

While reasons for borrowing may vary, the underlying appeal is often the same: creating liquidity in the short term without disrupting your long-term investment plan.

How to approach a buy-borrow-die strategy

Successfully executing a buy-borrow-die approach starts with getting the foundation right and making sure each step supports the next. That involves building a portfolio designed for long-term growth and flexibility, using borrowing selectively to meet liquidity needs, and coordinating repayment with your broader tax and estate plan. Here’s how the three steps fit together.

Step 1: Invest by building a liquid, diversified portfolio

The strategy starts long before you borrow. The goal is to build a liquid, diversified portfolio that can potentially increase in value over time. This can include both tangible and intangible assets, such as:

It is common practice to hold funds earmarked for a specific future use in more liquid investments, such as stocks and bonds.

Using investments that are easy to turn into cash is just one of several key principles you should keep in mind when building a flexible investment portfolio that can serve as reliable collateral if you ever need to borrow. You should also avoid putting all your eggs in one basket; if your portfolio is largely tied up in one stock or one industry, its value can suddenly drop, which would be a problem if you’re relying on it as a backup for a loan.

Ideally, you should invest in assets that can enjoy long-term growth while generating passive income. Once you’ve built your portfolio accordingly, you can then consider borrowing against a portion of it to meet your near-term cash needs without forcing a sale at an inopportune time.

Step 2: Borrow using a securities-based line of credit

There are several ways you can borrow against your assets, depending on the asset and your goals. A securities-based line of credit (SBLOC) is a common tool used to implement a buy-borrow-die strategy. Specifically, it’s a line of credit secured by eligible marketable securities – like stocks, bonds or mutual funds – held in a brokerage account. The investor does not have to sell the underlying securities but must pay back the cash they use, with interest.

Interest rates on SBLOCs can be variable but may be lower than those on traditional loans and lines of credit. Borrowers may be able to choose to make interest-only payments or principal payments, offering additional flexibility. Sometimes, there is no setup fee, credit check or financial disclosure required for an SBLOC. Borrowers can also decide what cadence their repayment schedule follows.

Of note, a borrower’s credit limit, known as the advance rate, can vary by institution as well as the overall value and type of holdings in the portfolio.

Step 3: Hold to preserve long-term wealth

A buy-borrow-die strategy can be used as a generational wealth transfer and estate planning tool for families. Rather than selling investments to satisfy liquidity needs, borrowing against a growing portfolio provides a lifelong stream of cash for the owner while preserving assets for their heirs.

Under current U.S. tax law, heirs may receive assets with a “stepped-up” cost basis equal to the fair market value on the date of the owner’s death. This effectively reduces – and, in some cases, eliminates – embedded capital gains tax if the inheritor sells, therefore minimizing a burdensome tax bill while maintaining the long-term value of the assets. Should heirs choose not to sell their assets, they may also choose to follow the buy-borrow-die strategy and continue to build wealth for the next generation of inheritors.

Compare this approach to gifting: If an investor were to gift securities to a would-be heir instead of holding them until death, the owner’s cost basis would carry over to the recipient at the time of the gift, potentially resulting in significant capital gains tax when the recipient later sells the asset.

By contrast, under a buy-borrow-die strategy, the loan doesn’t disappear at death; it typically becomes a debt of the estate and must be repaid, often using estate cash or by selling or transferring pledged assets, potentially reducing what heirs ultimately receive.

Where a buy-borrow-die strategy is implemented, families should take care to address SBLOC debt repayment and asset transfer in the estate plan. Speaking to a trusts and estates attorney can help you figure out the best way to manage this.

Case study: Buy-borrow-die in action

To see how the buy-borrow-die strategy works, let’s consider a hypothetical scenario: Jordan has a $1,000,000 taxable investment portfolio with an original cost basis of $250,000 and an unrealized gain of $750,000. Jordan needs $200,000 in cash today, expects the portfolio to earn 7% annually and is planning over a 10-year horizon assuming a 23.8% long-term capital gains rate. He can take one of two options:

In other words, selling will reduce how much stays invested and can compound over time, while borrowing can keep the portfolio invested until it’s time to pass down the money through a coordinated estate plan.

Risks to borrowing against your investment portfolio

As with any financial product, there are potential risks to consider when you borrow against securities. If the value of your collateral drops, you could face a margin call, which means you’ll need to deposit additional funds or sell securities to reduce the size of the loan. If you’re unable to satisfy the requirements, the lender has the right to sell some or all of your securities. Selling those securities could trigger capital gains tax. That’s why this approach tends to work best when borrowing is modest relative to the size of the overall portfolio, leaving a cushion to help absorb market swings.

If your loan has a variable rate, the cost of borrowing may change over time as interest rates move. For longer-term needs, it can help to plan for a range of rate scenarios and confirm the repayment approach still works. If you prefer more predictable payments, a fixed-rate term loan (or another fixed-rate option) may be a better fit.

The bottom line

Used thoughtfully, a buy-borrow-die approach can help you meet liquidity needs while staying invested. It’s typically best suited for investors with a sizable, diversified taxable portfolio, strong cash flow and a clear plan for managing borrowing costs and market volatility. Be sure to consider the risks – including margin calls, variable interest rates and the possibility of forced sales that could trigger tax charges.

Because borrowing has estate-planning nuances, you should speak to a tax and legal professional to understand how this approach fits into your wealth transfer strategy. Before moving forward, consider reviewing your approach with a J.P. Morgan advisor to make sure it fits your balance sheet and long-term plans.

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