Living Tax-Free: The “Buy, Borrow, Die” Strategy
Living Tax-Free: The “Buy, Borrow, Die” Strategy
Why selling assets to fund your lifestyle is a rookie mistake. How to use Securities-Backed Lines of Credit (SBLOC) to generate tax-free cash flow forever.
Executive Summary
- The Tax Trap: You have $10M in Apple stock. You want to buy a $2M house. If you sell $2M of stock, you trigger ~$500k in Capital Gains Tax. You lose 25% of your purchasing power instantly.
- The “Borrow” Fix: Instead of selling, you pledge the $10M stock as collateral for a Securities-Backed Line of Credit (SBLOC). You borrow $2M at a low interest rate. Loan proceeds are NOT taxable income. You get $2M cash, pay $0 tax, and keep your Apple stock growing.
- The “Die” Escape: When you eventually die, your heirs receive the Apple stock with a “Step-Up in Basis.” The embedded capital gains tax liability vanishes. They sell the stock tax-free, pay off the $2M loan, and keep the rest. Result: You lived tax-free, and the IRS got nothing.
The Margin Call Risk
Danger Zone: Leverage cuts both ways. If your stock portfolio crashes (e.g., -40%), the bank will issue a “Maintenance Call,” forcing you to deposit cash or sell assets at the bottom.
👉 Safety Rule: Never borrow more than 30-40% LTV (Loan-to-Value). If you stay conservative, you can weather almost any market storm without being liquidated.
Mechanic: The Wealth Flywheel
0% Tax
Loan = Debt
Keep Upside
Asset Growth
Liquidity
T+1 Access
Step-Up
Tax Eraser
Simulation: Funding a $100k Lifestyle (Selling vs. Borrowing)
Cost of Liquidity Comparison
| Feature | Selling (Realizing Gains) | Borrowing (SBLOC/PAL) |
|---|---|---|
| Tax Impact | Immediate Capital Gains Tax | None (Debt is not income) |
| Asset Ownership | Lost forever | Retained (Dividends still pay you) |
| Cost | 20-30% of Principal | Floating Interest Rate (SOFR + Spread) |
“The poor work for money. The middle class sell assets for money. The rich use assets as collateral for money. If you never sell, you never pay tax.”
Essential Resources
INTERNAL
BMT Playbooks
Liquidity-Strategy > Buy-Borrow-Die”
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