Buy, Borrow, Die Paradox: How The Rich Get Richer Using Debt

What if you could grow your wealth, avoid taxes, and pass on your assets to your heirs without capital gains?

In this episode, Mike discusses the *Buy, Borrow, Die* strategy—a powerful tax avoidance method used by the wealthy to preserve and grow wealth. By buying appreciating assets, borrowing against them tax-free, and passing them on to heirs with a stepped-up basis, individuals can minimize taxes on both capital gains and inherited wealth. Mike breaks down how this strategy can apply to anyone with appreciating assets and provides a step-by-step guide on how to implement it effectively.

Discover the Buy, Borrow, Die strategy and how it can work for you!

[00:00 - 01:14] Introduction to the Buy, Borrow, Die Strategy

• Mike introduces the concept of how the wealthy use this strategy to appear less wealthy and minimize taxes.
• He highlights the focus on buying assets, borrowing against them, and passing them on tax-efficiently.

[01:14 - 02:35] Tax Concepts: Step-Up in Basis and Borrowing Against Assets

• Explanation of the step-up in basis: heirs inherit assets at market value, avoiding capital gains.
• Borrowing against assets like stocks or real estate doesn’t count as taxable income.

[02:35 - 04:36] Example: Stock Appreciation, Tax Efficiency, Real Estate Borrowing, and Inheritance

• Mike illustrates how borrowing against appreciated stocks allows tax-free access to funds.
• The example shows how holding assets until death can help heirs avoid capital gains.
• Mike shares an example of real estate borrowing and how it affects taxes for heirs.
• He emphasizes holding onto assets until death to maximize tax advantages.

[04:36 - 07:40] Not Just for the Ultra-Wealthy

• Mike explains that anyone with appreciating assets can utilize this strategy, not just billionaires.
• He details how it can apply to people with real estate, stocks, and businesses.
• The steps include acquiring appreciating assets, borrowing wisely, and planning for a tax-efficient exit.
• Mike highlights the importance of planning for your heirs and consulting financial advisors.

[07:40 - 09:32] Final Thoughts: How to Maximize This Strategy

• Mike encourages strategic planning for asset management and borrowing to avoid unnecessary capital gains.
• Mike suggests working with financial advisors for long-term wealth building and minimizing tax burdens.

Direct Quotes:

“The truth is that most billionaires are not paying more in taxes as their wealth skyrockets, like the average person does.” - Mike Jesowshek, CPA

“Borrowing against assets like stocks or real estate doesn’t count as taxable income. That loan money is not income to you, so it’s also not taxable.” - Mike Jesowshek, CP

“In a perfect world, you hold onto appreciating assets until death, ensuring the most tax-efficient exit for your heirs.” - Mike Jesowshek, CP

"Use borrowed funds wisely—invest in other things, grow your wealth, and maximize the opportunity." - Mike Jesowshek, CP

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Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast

Join TaxElm: https://taxelm.com/

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