Let’s say you put $20M as collateral for an SBLOC loan. The collateral amount and grows at ≥7%/year and you’re charged interest on your loan of 4%/year. You pull $1M/year that goes into the loan. This goes on for 40 years.

At death the cost basis is stepped up to the value at the time of death. All capital gains are erased.

Next, the loan is paid back before any distribution to heirs. This is done at 0% tax rate because it happens before any distribution to heirs.

Finally, the heirs get what remains and any inheritance tax applies to that.

So you got to live with no income tax related to capital gains. The capital gains are wiped out upon death.

Had you paid taxes along the way, you’d leave about $37M to your heirs (and none of that would be touched by inheritance tax).

If you did the SBLOC strategy, The portfolio grew to around $300M. The loan principal and interest are around $100M. Taxes are $64M. Your heirs get to keep $136M.

There’s less risk since there is never any sales over a longer period, so the returns approach the average.

There’s more tax paid by the SBLOC strategy, it just happens very acutely instead of over time. The heirs are also left with significantly more.