This is the so-called buy-borrow-die strategy, and is a known loophole in current tax law.
(My impression from /r/askeconomics is that this is mostly a myth. One reason to expect it to be mostly-a-myth: if you borrow money for 30 years until you die, you’re paying 30 years of interest on that money, which is gonna be more than capital gains tax on just turning your stock into money.)
The interest is offset by getting to keep the asset and its additional gains past when you would have sold it while still accessing a lot of the value; perhaps not worthwhile for some assets, but namely for real estate, people would be foolish to sell any investment property that is cash flowing (if not enough paper losses to offset the capital gains if they were to just sell or without a 1031 exchange).
I am already starting to do it and my fiancée more-so. He pays less in taxes than me (right now mostly due to depreciation) and that is despite making much more with real estate. We haven’t gotten to the die part, but with mortgage interest being tax deductible, you can continuously pay very little in taxes continuing to refinance out your equity in a property instead of selling.
(My impression from /r/askeconomics is that this is mostly a myth. One reason to expect it to be mostly-a-myth: if you borrow money for 30 years until you die, you’re paying 30 years of interest on that money, which is gonna be more than capital gains tax on just turning your stock into money.)
The interest is offset by getting to keep the asset and its additional gains past when you would have sold it while still accessing a lot of the value; perhaps not worthwhile for some assets, but namely for real estate, people would be foolish to sell any investment property that is cash flowing (if not enough paper losses to offset the capital gains if they were to just sell or without a 1031 exchange).
I am already starting to do it and my fiancée more-so. He pays less in taxes than me (right now mostly due to depreciation) and that is despite making much more with real estate. We haven’t gotten to the die part, but with mortgage interest being tax deductible, you can continuously pay very little in taxes continuing to refinance out your equity in a property instead of selling.