Billionaires generally pay for things by borrowing against their investment portfolios rather than spending cash from a bank account. The question of how billionaires pay for things has a fairly consistent answer at the top of the wealth ladder: pledge stock as collateral, draw on a low-interest line of credit secured by that stock, and let a family office execute the actual payments. Loan proceeds are not taxable income, so this approach funds enormous purchases without triggering the capital gains taxes that would come from selling appreciated assets.
Buy, Borrow, Die: The Framework Behind the Spending
The strategy wealth managers call “buy, borrow, die” is the reason borrowing beats selling at this level. It has three stages, and each one has a specific tax purpose.
First, the wealthy individual buys assets expected to appreciate: publicly traded stock, private company equity, real estate. Appreciation is not taxed until the asset is sold. Someone whose portfolio grows from $100 million to $1 billion owes zero capital gains tax on that $900 million gain as long as they hold the shares. The federal long-term capital gains rate for top earners is 20%, plus a 3.8% net investment income tax, so avoiding a sale on $900 million in gains defers roughly $214 million in federal taxes alone.
Second, instead of selling, the individual borrows against the portfolio. A bank extends a line of credit secured by the holdings, and the borrower draws funds as needed. Federal tax law does not treat loan proceeds as income because there is a corresponding obligation to repay. Interest on the loan is a fraction of what a sale would cost in tax.
Third, when the borrower dies, the cost basis of their assets resets to fair market value at the date of death. This stepped-up basis wipes out a lifetime of unrealized gains. Heirs can then sell enough assets at the new basis to repay the outstanding loans and owe little or no capital gains tax. The appreciation that funded decades of spending is never taxed.
Securities-Backed Lines of Credit
The borrowing tool that makes daily spending possible is a Securities-Backed Line of Credit, usually shortened to SBLOC. The borrower pledges a portion of their investment portfolio as collateral to a private bank, and the bank opens a revolving credit line against those assets. Funds can be drawn at any time without selling a share, so no taxable event is triggered.1FINRA. Securities-Backed Lines of Credit Explained
How much is available depends on what is pledged. FINRA notes that a typical SBLOC agreement permits borrowing from 50% to 95% of the value of the pledged account, with the percentage varying based on total holdings and asset type.1FINRA. Securities-Backed Lines of Credit Explained A diversified portfolio of blue-chip stocks qualifies for a higher percentage than a concentrated position in one volatile company. For a billionaire holding $500 million in marketable securities, even a conservative 50% loan-to-value ratio produces a $250 million credit line available on demand.
Interest rates on these lines are tied to the Secured Overnight Financing Rate, or SOFR, which became the dominant U.S. dollar benchmark after replacing LIBOR.2Federal Reserve Bank of New York. Transition From LIBOR Banks add a spread on top of the benchmark, and for clients borrowing at this scale, the total rate is remarkably low compared to any consumer product. Low interest plus zero tax on the borrowed funds makes this the cheapest way to pull cash out of an investment portfolio.
The Risk: Maintenance Calls
The catch is that portfolios lose value. Lenders enforce strict loan-to-value ratios and monitor them continuously. If the pledged securities drop below the required threshold, the bank issues a maintenance call. The borrower has a short window, typically two or three days, to post additional collateral or repay part of the loan. If neither happens, the bank can sell the pledged securities without the borrower’s consent.1FINRA. Securities-Backed Lines of Credit Explained A forced sale during a downturn triggers the very capital gains tax the borrower was trying to avoid, and it happens at depressed prices.
There is also a boundary on what the borrowed money can be used for. Under the Federal Reserve’s Regulation U, credit secured by margin stock cannot be extended to buy or carry additional margin stock beyond specified limits, and loans above $100,000 in that category require the borrower to execute a Form FR U-1 documenting the loan’s purpose.3eCFR. Part 221 Credit by Banks and Persons Other Than Brokers or Dealers for the Purpose of Purchasing or Carrying Margin Stock (Regulation U) SBLOCs used for lifestyle spending are structured as non-purpose loans, meaning the proceeds go toward real estate, business investments, or personal expenses rather than more stock.
The Actual Point of Sale: Elite Credit Cards
The tap or swipe at a merchant usually happens through cards designed for ultra-high-net-worth clients. Products like the American Express Centurion Card and the J.P. Morgan Reserve Card are invitation-only and require either a substantial history of high-volume spending or significant assets under management at the issuing bank. These cards carry no pre-set spending limit, so a $200,000 furniture purchase or a last-minute charter clears without a hold.
Behind the card, the issuer routes transactions through the cardholder’s private banking infrastructure. A 24/7 concierge team monitors the cardholder’s location and pre-clears large international purchases so fraud alerts do not block legitimate spending. When someone is bidding on art at auction in London at 2 a.m. New York time, the transaction has to go through instantly. The card is less a credit product than a payment interface for the lending and banking structure sitting underneath it.
Family Offices Handle the Payments
Billionaires do not personally manage the mechanics of paying for things. That job belongs to a family office, a private financial management firm dedicated to a single household. Staff typically includes accountants, a chief financial officer, tax attorneys, and administrative personnel who run what amounts to an accounts payable department for the household. They review invoices, manage payroll for staff like housekeepers and pilots, schedule recurring payments, and confirm large outflows.
Running this operation is expensive. According to J.P. Morgan’s 2026 Global Family Office Report, the average annual operating cost for a family office managing $1 billion or more in assets is $6.6 million. For offices managing $250 million to $500 million, the average drops to $1.7 million. Those figures cover salaries, technology, compliance, and overhead for what is essentially a small financial firm with one client.
When a household buys a yacht or a piece of real estate, the family office executes the payment. Multimillion-dollar transfers move through the Federal Reserve’s Fedwire Funds Service, a real-time settlement system for large-value, time-critical transfers that are immediate, final, and irrevocable once processed.4Federal Reserve Board. Fedwire Funds Services Internal authorization protocols require multiple advisors to verify each wire.
Cross-border spending adds compliance work. The family office coordinates with global banks on currency exchange and Bank Secrecy Act obligations,5Internal Revenue Service. Bank Secrecy Act and any household member with foreign financial accounts exceeding $10,000 in aggregate value at any point during the year must file a Report of Foreign Bank and Financial Accounts with FinCEN.6Financial Crimes Enforcement Network. Report Foreign Bank and Financial Accounts
Big-Ticket Assets Are Owned Through Entities
Most of the expensive things a billionaire uses are not owned by the billionaire personally. Private jets, yachts, vacation homes, and art collections are frequently held by LLCs, trusts, or other corporate entities. A private jet is commonly owned by a single-purpose LLC that contracts for fuel, maintenance, hangar space, and pilot salaries. The billionaire funds the LLC, and the LLC pays the bills. This structure limits personal liability and simplifies the accounting for what is effectively a small aviation business.
When a corporate-owned aircraft is used for personal travel, the value of that flight has to be accounted for under federal tax rules. The employee either reimburses the company or includes the flight’s value as taxable income, usually calculated using the Standard Industry Fare Level method, which values flights at roughly 18 to 25 cents per mile. That is far below the actual cost of operating a private jet.
Residences get similar treatment. A Qualified Personal Residence Trust, or QPRT, allows a homeowner to irrevocably transfer a residence into a trust while continuing to live there for a set number of years. The purpose is to minimize estate and gift taxes by moving property expected to appreciate out of the owner’s taxable estate at a discounted value.7Legal Information Institute (LII) / Cornell Law School. Qualified Personal Residence Trust (QPRT) Once the trust term ends, the property belongs to the beneficiaries, and the original owner can only stay by paying fair-market rent. During the term, the trust handles property taxes, insurance, and upkeep.
Funding Investment Commitments on Short Notice
Beyond daily spending, billionaires need to fund investment commitments that come due quickly. Private equity and venture capital funds do not collect the full commitment upfront. Instead, the fund issues capital calls as it finds deals, giving investors a notice period of roughly 10 business days to wire the money. Someone with $50 million or $100 million committed across several funds can see multiple calls arrive in the same month.
Meeting those calls without selling assets takes planning. Some investors hold a cash reserve for the purpose, though sitting on cash drags down returns. Others draw on their SBLOC to fund the call and repay the draw over time as distributions come back from earlier fund investments. At the fund level, general partners sometimes use subscription lines of credit to bridge the gap between closing a deal and calling capital from investors.
Charitable Giving as Part of the Payment System
Philanthropy sits inside the same financial machinery, not outside it. Most billionaire families operate a private foundation funded with appreciated assets. Donating appreciated publicly traded stock to a public charity allows the donor to deduct the full fair market value, up to 30% of adjusted gross income, without ever recognizing the capital gain. Qualified appreciated stock donated to a private nonoperating foundation is also deductible at fair market value, though with a lower ceiling.8Internal Revenue Service. Publication 526, Charitable Contributions
Once assets are inside the foundation, federal tax law requires the foundation to distribute at least 5% of the fair market value of its assets each year for charitable purposes. For a foundation with $1 billion in assets, that means at least $50 million must go out the door annually. The family office typically manages the foundation’s operations alongside the household’s personal finances, so grants, compliance filings, and endowment management run through the same team that pays the household’s electric bill.