☕ Good morning!

For most people, debt is a liability. For the ultra-wealthy, it’s a playbook. They’re not borrowing to survive, they’re borrowing to control and do things like sidestep tax gravity, stretch liquidity without selling, and to plant money trees that grow for grandkids long after they’re gone.

When billionaires take on leverage, it’s not the “good debt vs. bad debt” cliché. It’s tax-engineered, risk-insulated, cross-jurisdictional choreography.

Let’s peel back the curtain and walk through six surgical ways the wealthiest families weaponize debt, not to buy more, but to own forever.

🎯 Rewriting Your Tax Footprint Before the Liquidity Bomb Hits

Ultra-wealthy real estate owners rarely sell a good position. They refinance.

A wealthy real estate investor owned old buildings that were mostly paid off (they were worth a lot, but he had almost no original cost basis left for tax purposes).

He took out loans against those buildings, basically turning some of the value into cash for himself, without selling them.

Later, he moved the buildings into a type of estate planning tool called a grantor trust. When he died, his heirs got the buildings with a “step-up in basis,” meaning the buildings were now valued for tax purposes at their full market value at the time of his death, not the original low cost.

So even though he pulled out cash (and the properties were now carrying debt), his heirs didn’t get hit with capital gains taxes on the increase in value. The assets got a clean tax reset.

🍎TL;DR: He turned untaxed value into cash during his life, kept the assets in the family, and his heirs avoided capital gains taxes thanks to smart estate planning.

💪 Debt Within Reach

Say you have a bunch of public stocks (like Apple, Google, index funds). Instead of selling them and triggering taxes, you can borrow against them using a margin loan (low-interest debt backed by those stocks).

Say you’ve built up a sizable portfolio of public stocks, and you need $100,000 in cash. One option is to sell off part of your portfolio. But if those assets have appreciated, that sale triggers a tax event. 

At the top tax bracket, you’re likely handing over 23.8% of your gains to the IRS. So if you bought that stock for $20,000 and it’s now worth $100,000, that’s $19,040 straight to the IRS. You walk away with about $80,960.

You walk away with just over $80,000.

Now, consider a different path. 

Instead of selling, you take out a margin loan against your portfolio. Rates vary depending on the brokerage, but let’s say you’re paying around 6.5% interest. That’s about $6,500 a year, less if you repay it quickly. 

You get the full $100,000 without selling a single share, and you avoid realizing any capital gains. The market keeps working for you (or against you, in some cases), and you’ve got cash on hand to deploy.

That borrowed money could go toward exercising private equity options, seeding a business, making a down payment on a second property, or just building a dry powder reserve. None of those uses require you to liquidate your portfolio. 

You’ve kept your upside intact and deferred the tax bill until later, maybe much later, maybe never, depending on how the rest of your planning is structured.

So, side-by-side:

1. Selling gives you ~$80,960 in cash but costs ~$19,000 in taxes now.

2. Borrowing gives you the full $100,000 upfront, no taxes due, and you pay ~$6,500/year in interest, and less if repaid sooner.

You could do the same with real estate portfolios holding low-leverage properties or RSUs nearing vest. 

⚠️ Words of warning

Of course, it’s not all upside. Borrowing against your portfolio isn’t free money, it’s someone else’s capital, and eventually, they’ll want it back. 

If the market dips and the value of your holdings drops below a certain threshold, you could face a margin call: the broker demands you either deposit more funds or sell your assets to cover the loan. That can turn a well-intentioned liquidity play into a forced sale at the worst possible time.

Even without a crash, the interest meter keeps running. And if you’ve used the funds to invest in something illiquid or long-term, say, private equity or a startup option exercise, you may not be able to unwind quickly or easily.

🎥 How the Wealthy Weaponize Debt (Without Getting Burned)

In this video, I’ll break down how high earners think about debt as a tool and real-world strategies like margin loans, asset-backed lending, and why the structure of your income streams changes everything. 

Making Sense of Debt as a Weapon

I rarely see wealthy families rely on a single source of income, liquidity, or debt. 

They build out multiple channels: cash flow from real estate, dividends from public equities, K-1 income from private partnerships, business revenue, even life insurance structures. When markets swing or one asset class takes a hit, they have room to maneuver. The debt only works because the rest of the plan does.

The unifying theme is that the uber wealthy treat debt like an asset that buys time, leverage, and optionality, while keeping their core holdings compounding. 

Without multiple income streams and liquidity reserves, this approach can be dangerous. But as part of a disciplined, long-range plan, strategic debt becomes a force multiplier.

Stay savvy, stay proactive, and keep your financial future bright.

Until next week!

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

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