This free online calculator shows how affluent investors buy appreciating assets, borrow against them instead of selling (so no capital gains), and potentially pass assets to heirs with a step-up in basis—use the calculator to test your numbers, debt safety, and long-term net worth in seconds.
Buy · Borrow · Die — Calculator
Enter your assumptions. Borrowing is auto-inflation-indexed, leverage is capped, and the table shows each year’s asset, loan, interest, and net worth.
| Year | Start Asset | End Asset | Start Loan | New Borrow | Interest | End Loan | Leverage | Net Worth |
|---|---|---|---|---|---|---|---|---|
| Totals | $— | $— | $— | —% | $— | |||
This tool is for illustration only and is not financial, tax, or legal advice.
How this calculator works
- What it simulates: Each year your assets grow by your “Investment Growth %,” your existing loan accrues interest, and you take a new borrowing draw that scales with inflation to preserve real spending. We then cap total year-end leverage (loan ÷ assets) at your “Max Leverage %.” If the cap would be exceeded, the tool reduces that year’s borrowing and flags it in the table.
- Chart & risk cues: The chart plots Total Assets, Debt, and Net Worth with hover tooltips. Red shading marks years where Debt is at or above 90% of your own max-leverage cap—a practical warning band that you’re running close to lender limits.
- Key outputs:
- Leverage = end-of-year loan ÷ end-of-year assets
- Net Worth = end-of-year assets − end-of-year loan
- Totals row sums borrowing, interest, ending loan, and shows peak leverage
- “Final Net Worth (today’s $)” deflates by your inflation input for realism
What each input means
- Initial Investment ($): Starting asset value you plan to hold and borrow against.
- Annual Borrowing ($, Year 1): First-year draw; later years auto-increase with your Inflation % (so lifestyle/spending stays constant in real terms).
- Investment Growth (%): Expected nominal return (after fees, before taxes).
- Loan Interest (%): Your borrowing rate (for many, a securities-based line of credit or pledged-asset loan).
- Inflation (%): Used to index borrowing and to compute the “today’s $” metric.
- Max Leverage (%): Your personal or lender limit for loan-to-asset ratio; the simulator enforces this every year.
- Simulation Years: Horizon for the plan.
Strategy context (why people use this)
The classic Buy-Borrow-Die idea is: buy assets that appreciate, borrow against them for spending (borrowing generally doesn’t create taxable income, though canceled debt can be taxable), and at death heirs may receive a step-up in basis, potentially erasing lifetime unrealized gains under current U.S. rules. This combination is why some wealthy households can fund consumption with relatively low current taxes.
- Loans vs. taxes: Borrowing proceeds are typically not taxed as income because there’s an obligation to repay; however, forgiven or canceled debt can become taxable income (“cancellation of debt”). See IRS guidance.
- Step-up in basis: U.S. law (IRC §1014) generally resets an inherited asset’s cost basis to fair market value at death, which can eliminate income tax on prior appreciation if heirs sell soon after. Policymakers debate reforms; always verify current rules.
Practical constraints & risks
- Lender rules and calls: Securities-based loans require maintaining collateral; markets can fall, triggering maintenance calls to add cash/securities or forcing liquidation. Proceeds are often restricted by lenders (e.g., not usable to buy margin stock). Plan with a buffer.
- Interest-rate & return risk: If your borrowing rate rises or returns fall, leverage can compound losses and make the plan infeasible—watch the chart’s red “risky” zones.
- Interest deductibility is limited: Investment-interest expense may be deductible only up to net investment income and often requires Form 4952; see IRS Pub 550 for details.
- Policy risk: The step-up rule and related tax treatment have been frequent reform targets in recent years—assume rules can change over your horizon.
- Concentration risk: This strategy works best with large, diversified, liquid portfolios and conservative loan-to-value targets; concentrated or illiquid assets amplify danger.
How to read your results
- If the summary says “Feasible,” your requested borrowing stayed under your leverage cap every year.
- If it says “Not Feasible,” at least one year required cutting borrowing to respect the cap—consider lowering spending, increasing assets, or tightening the horizon.
- Aim for ample cushion between Debt and your Max Leverage %; lenders often adjust advance rates during volatility.
Legal & financial disclaimer (please read)
This calculator is an educational tool and not tax, legal, accounting, or investment advice. The Buy-Borrow-Die approach involves significant market, liquidity, interest-rate, lender, and policy risk; borrowing to invest can magnify losses. U.S. tax rules cited (including IRC §1014 and investment-interest limits) may change and can apply differently to your facts; other jurisdictions differ. Consult a qualified tax advisor, estate attorney, and fiduciary financial planner before using any strategy described here.