Tax Deferral with Debt

If you have a portfolio of stocks that is performing, the best thing to do is to allow it to continue to grow without interrupting the compounding taking place. An article in the WSJ reports that wealthy investors accomplish this objective and simultaneously manage to secure liquidity by taking out loans secured by their stock portfolios.

For borrowers, the calculation is clear: If an asset appreciates faster than the interest rate on the loan, they come out ahead. And under current law, investors and their heirs don’t pay income taxes unless their shares are sold. The assets may be subject to estate taxes, but heirs pay capital-gains taxes only when they sell and only on gains since the prior owner’s death. The more they can borrow, the longer they can hold appreciating assets. And the longer they hold, the bigger the tax savings.

Source: Rachel Louise Ensign and Richard Rubin | “Buy, Borrow, Die: How Rich Americans Live Off Their Paper Wealth” | The Wall Street Journal | 7/10/2021 | Visit

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