Buy, Borrow Die....the rich do it, why not you?

Glad you asked as you are now digging into some advanced wealth-building strategies.

Let’s break this down piece by piece and then compare it to the Traditional 401(k):

Buy-Borrow-Die Strategy (with IRS Code 7702 involved)

🧠 What it is:

Buy-Borrow-Die is a tax-efficient wealth strategy used by high-net-worth individuals (HNWIs). It typically involves using life insurance (specifically permanent life insurance like Indexed Universal Life — IUL) as a financial tool.

Buy:You buy a permanent life insurance policy (which falls under IRS Code 7702) — not just for the death benefit, but because it builds cash value that grows tax-deferred.
Borrow:You borrow against the policy’s cash value — tax-free — and use that money for whatever you want: investing, living expenses, etc. These are policy loans, not taxable events.
Die:When you die, the loan is paid off from the death benefit, and your heirs get the remainder — all income tax-free.

IRS Code 7702

This part of the tax code defines how life insurance policies must be structured to maintain their tax advantages. **This is very important and why you want to work with a dedicated firm that has been designing these high cash value policies for more than 15 years.
If the policy meets 7702 standards, the growth in cash value isn't taxed, and the death benefit is income tax-free.

Why Someone Might Choose This Over a Traditional 401(k)

Feature	Traditional 401(k)	7702 Strategy (Permanent Life Insurance)
Tax Treatment on Growth	Tax-deferred	Tax Free if designed properly
Tax on Withdrawals	Taxed as ordinary income	Loans = tax-free
Required Minimum Distributions (RMDs)	Yes at age 73+	No RMDs
Contribution Limits	$23,000/year (2025, under 50)	No official limit, but depends on insurability/funding
Market Risk	Yes (unless in stable value funds)	Limited or none (especially in IULs/whole life)
Chronic Illness Benefits	Can access cash but will be fully taxable.	Accident or illness lasting more than 90 days allows insured access to death benefit with tax favorable status
Accelerated Death Benefits	Can access cash but will be fully taxable.	Allows access to a portion of death benefit if diagnosed with terminal illness with tax favorable status
Liquidity	Limited before 59½ (w/ penalties)	Loans anytime after value accumulates
Death Benefit	No	Yes — income tax-free

⚠️ Things to Watch Out For

Fees: Life insurance policies can have high fees upfront so make sure you are working with a professional that knows how to design these with your cash value in mind.
Underwriting: You have to qualify health-wise but if you are unable to be qualified you can purchase these contracts on family members and business associates.
Not an investment: It’s not designed to outperform the market — more about being under contract law, cash preservation, tax efficiency, and control.

🧪 So... Why Would Someone Use This?

You’re wealthy or high income, maxed out your Traditional 401(k)/Roth IRA options, and want more tax-advantaged growth or you understand your taxes will be higher in retirement so best to pay taxes today and enjoy tax free growth for the rest of your life.
You want tax-free access to funds in retirement or even before.
You have a 401k through work but your options are not particularly great. We see these with target funds more and more that are not performing along with dynamic indexes that back test well but do not track the markets movement over time.
You're playing the long game — estate planning, tax minimization, and wealth transfer.

For tax-savvy, legacy-minded wealth strategies, the 7702 “buy-borrow-die” method can be powerful.

Investing and savings, neither can be discussed without delving into a conversation on taxes today and in the future. When investing under current tax laws, the assets are taxed according to the whim of Congress at the time. Long term and short-term capital gains come into play based on how long you held the assets and which assets you hold.

If this thought of savings vs investing interests you, we would love to continue this conversation with a deeper dive over a meeting, so please feel free to get in touch.