The Billionaire’s Playbook: Can “Buy, Borrow, Die” Work in Canada?

We’ve all heard the legends of the ultra-wealthy living glamorous lives without ever seemingly paying a dime in tax. No, it’s not just offshore accounts and secret islands—it’s often a strategy famously dubbed “Buy, Borrow, Die.”

It sounds like a gothic novel title, but it’s actually a sophisticated financial loop. While it’s the “Holy Grail” of tax planning in the US, trying to copy-paste it into a Canadian tax return is a bit like trying to use a US plug in a European outlet—you’re going to see some sparks, and not the good kind.

1. The American Dream: How it Works in the US

In the United States, the tax code practically rolls out a red carpet for this strategy. Here is the three-step dance:

• BUY: You purchase assets that appreciate—think stocks, real estate, or private companies. You hold them forever. Since you never sell, you never trigger Capital Gains Tax.

• BORROW: Instead of selling stock to buy that yacht (or, more likely, a grocery store chain), you take out a loan using your assets as collateral. Because loan proceeds aren’t “income,” they are tax-free. You live off the debt, paying a low interest rate that is often far less than the growth of your assets.

• DIE: This is the “magic” step. In the US, there is a rule called the Step-up in Basis. When you die and leave your $100M portfolio to your kids, their “cost” for tax purposes is reset to the value on the day you died ($100M). The decades of growth? Poof. Effectively erased for tax purposes. Your heirs sell a few shares tax-free to pay off your loans, and they keep the rest.

2. The Canadian Reality Check: Why We Can’t Have Nice Things

If you try this in Canada, the Canada Revenue Agency (CRA) has a very different ending planned for your story.

Canada does not have a “Step-up in Basis.” Instead, we have something called Deemed Disposition.

The moment you pass away, the CRA treats it as if you sold every single thing you owned at Fair Market Value exactly one nanosecond before you died.

• The Tax Hit: If you bought a cottage for $200k and it’s worth $2M when you die, your final tax return will show a $1.8M capital gain.

• The Inclusion Rate: While there was talk of hiking the inclusion rate to 66.7%, as of early 2026, it remains at 50% (for individuals on the first $250k). Regardless, the bill is massive and must be paid in cash—which often leads to “fire sales” of family assets just to pay the taxman.

In short: In the US, death is a tax escape. In Canada, death is the ultimate tax trigger.

3. The Canadian Remix: The “Whole Life” Workaround

Does this mean Canadians are stuck? Not exactly. We just have to swap the “Buy” part for something the CRA treats more kindly: Participating Whole Life Insurance.

In Canada, this is often structured as an Immediate Financing Arrangement (IFA). Here is how the Canadian version of “Buy, Borrow, Die” looks:

• BUY (The Policy): You put significant capital into a Whole Life insurance policy. The “Cash Value” inside the policy grows tax-deferred, similar to a giant, corporate-sized TFSA.

• BORROW (The IFA): Once the policy has enough “Cash Value,” you use it as collateral for a line of credit from a bank. You use that borrowed money to reinvest in your business or other properties. In many cases, the interest on that loan is tax-deductible, making the “borrow” part even cheaper than it is for Americans.

• DIE (The Payout): When you pass away, the life insurance Death Benefit is paid out tax-free.

  • First, the insurance money pays off the bank loan automatically.

  • The remaining cash goes to your heirs.

  • If you did this through a corporation, it creates a massive credit to your Capital Dividend Account (CDA), allowing your heirs to pull other money out of the company tax-free as well.

The Bottom Line

In the US, the strategy relies on the tax code ignoring your gains when you die. In Canada, we have to use Insurance because it’s one of the few assets the CRA allows to pass to the next generation without the “Deemed Disposition” hammer coming down.

It’s the same goal—liquidity today, legacy tomorrow—just with a different toolset.