09/14/2026
Most people build wealth by selling.
The wealthy often build it by doing the opposite.
Instead of selling their investments when they need cash, they use those investments as collateral, borrow against them, and keep the assets invested.
Then, when they die, those assets can pass to their heirs with a dramatically higher tax basis.
This strategy is completely legal under current U.S. tax law, and variations of it have been used for generations.
Hereâs what it can look like.
Imagine Dad puts $50,000 into stocks.
Over the years, that investment grows to $2 million.
If he sells the shares, he has a $1.95 million capital gain. At a 20% long-term capital gains rate, plus the 3.8% Net Investment Income Tax, the federal tax bill could reach about $464,100.
So why sell?
Instead, he can take the shares to a bank and use them as collateral for a loan.
The bank lends him money based on the value of his portfolio.
And because he received a loan rather than selling the stock, the borrowed money generally isnât taxable income.
He can use the cash to cover living expenses, buy things, travel, invest elsewhere, or simply maintain his lifestyle.
Meanwhile, he still owns the stock.
If the stock continues climbing, his investment keeps growing while he continues to access cash through borrowing.
Eventually, he dies while still holding the appreciated shares.
And this is where the strategy becomes especially interesting.
Itâs called a âstep-up in basis.â
Under current U.S. tax rules, inherited assets generally receive a new cost basis based on their fair market value at the ownerâs death.
Dad originally paid $50,000.
At the time of his death, the shares are worth $2 million.
His heirs may therefore receive them with a $2 million tax basis.
If they immediately sell them for around $2 million, there may be little or no capital gain from that appreciation.
The decades of growth that occurred during Dadâs lifetime may never be subject to capital gains tax in the way they would have been if Dad had sold the shares himself.
The outstanding loans can be handled by the estate, and whatever wealth remains can pass to the children.
No hidden offshore account.
No secret loophole reserved for billionaires.
Just a legal strategy built around three things:
Own appreciating assets.
Borrow against them instead of selling them.
Pass them on through proper estate planning.
This is one reason understanding the tax code can matter just as much as understanding how to make money.
Two people can earn the same amount and build very different levels of wealth depending on what they know about taxes, investing, debt, and estate planning.
The rules are available to everyone.
But the knowledge of how to use them has never been distributed equally.
