The Leading Business Education Network for Doctors, Financial Advisors and Health Industry Consultants

Dr. David Edward Marcinko; MBA MEd

SPONSOR: http://www.CertifiedMedicalPlanner.org

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How It Works and Why It’s Legal

A well‑known wealth‑preservation strategy in the United States involves three major steps: placing highly appreciated assets such as stock into a trust, borrowing against those assets to generate tax‑free living income, and ultimately passing the assets to heirs who receive them with a “step‑up” in basis at death. This approach is often described as a way for the wealthy to live richly while minimizing income and capital‑gains taxes. Although controversial, the strategy is largely legitimate under current U.S. tax law. Understanding why requires examining each component of the system and how they interact.

1. Contributing Appreciated Stock to a Trust

The first step is transferring appreciated stock—often shares in a family business or long‑held public equities—into a trust. The type of trust matters. Many wealthy individuals use revocable living trusts or grantor trusts, which allow them to retain control over the assets while still receiving favorable tax treatment.

Under U.S. tax rules, transferring assets into a revocable trust is not a taxable event. The IRS treats the trust as an extension of the individual. The owner continues to report income, dividends, and gains on their personal tax return. The trust simply holds the assets for estate‑planning purposes.

This means a person can move millions or even billions of dollars’ worth of stock into a trust without triggering capital‑gains tax, even if the stock has appreciated dramatically over decades.

2. Borrowing Against the Assets Instead of Selling Them

Once the assets are in the trust, the next step is to borrow against them. Wealthy individuals often take out large loans using their stock portfolio as collateral. This is sometimes called “securities‑based lending” or “asset‑backed borrowing.”

Why borrow instead of sell?

Because loans are not taxable income.

Under U.S. tax law, borrowed money is not considered income because it must be repaid. As a result, a wealthy person can borrow millions of dollars at relatively low interest rates—especially when using high‑value stock as collateral—and use that borrowed money to fund their lifestyle.

This allows them to:

• Avoid selling stock
• Avoid realizing capital gains
• Avoid paying capital‑gains tax
• Maintain ownership and control of the appreciating asset

Meanwhile, the interest on the loan may be deductible in certain circumstances, depending on how the borrowed funds are used.

This “borrow instead of sell” approach is a cornerstone of many ultra‑wealthy tax strategies. It effectively allows individuals to access liquidity without triggering taxable events.

3. Passing the Assets to Heirs With a Step‑Up in Basis

The final step occurs at death. Under current U.S. tax law, when someone dies, most assets they own receive a step‑up in basis. This means the cost basis of the asset resets to its fair market value at the time of death.

For example:

• Suppose someone bought stock for $1 million decades ago.
• At death, the stock is worth $20 million.
• The heirs inherit the stock with a basis of $20 million.

If the heirs sell the stock immediately, they owe zero capital‑gains tax.

This step‑up in basis rule effectively erases decades of unrealized gains. It is one of the most powerful wealth‑transfer tools in the U.S. tax system.

4. Is This Strategy Legitimate?

Under current law, yes, the strategy is legitimate. Each component is explicitly allowed:

• Transferring assets to a revocable trust is not a taxable event.
• Borrowing against assets is not considered income.
• Step‑up in basis at death is a long‑standing feature of the tax code.

The IRS is fully aware of these practices, and they are widely used by wealthy families, business owners, and even some middle‑class households with appreciated real estate.

However, the strategy is controversial. Critics argue that it allows the wealthy to avoid taxes in ways ordinary workers cannot. A salaried employee cannot borrow against future wages to avoid income tax, but a billionaire can borrow against stock to avoid capital‑gains tax indefinitely.

Supporters counter that the rules encourage investment, entrepreneurship, and long‑term asset growth. They also note that estate taxes may still apply to very large estates, though many trusts are structured to minimize or avoid estate tax as well.

5. Why the Strategy Works

The strategy works because the U.S. tax system distinguishes between:

• Realized gains (taxable)
• Unrealized gains (not taxable)
• Loans (not taxable)

As long as the wealthy avoid selling appreciated assets, they avoid realizing gains. Borrowing provides liquidity without triggering tax. And the step‑up in basis wipes out the deferred tax liability at death.

6. Could the Law Change?

Yes. Proposals have been made to:

• Eliminate the step‑up in basis
• Tax unrealized gains above certain thresholds
• Limit borrowing against assets
• Change trust rules

But as of now, none of these reforms have been enacted.

COMMENTS APPRECIATED

EDUCATION: Books

SPEAKING: Dr. Marcinko will be speaking and lecturing, signing and opining, teaching and preaching, storming and performing at many locations throughout the USA this year! His tour of witty and serious pontifications may be scheduled on a planned or ad-hoc basis; for public or private meetings and gatherings; formally, informally, or over lunch or dinner. All medical societies, financial advisory firms or Broker-Dealers are encouraged to submit an RFP for speaking engagements: CONTACT: Ann Miller RN MHA at MarcinkoAdvisors@outlook.com -OR- http://www.MarcinkoAssociates.com

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Dr. David Edward Marcinko; MBA MEd

SPONSOR: http://www.CertifiedMedicalPlanner.org

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An Exploration of Risk, Loss and the Human Condition

The phrase gambler’s blues evokes more than the image of a person sitting at a card table after a bad night. It captures a universal emotional state: the hollow ache that follows risk taken in hope, the sting of loss, and the quiet reckoning that comes when the adrenaline fades. While the gambler’s world is built on cards, dice, and wagers, the blues that follow are deeply human, rooted in longing, regret, and the relentless pull of possibility. In many ways, the gambler’s blues is a metaphor for the cycles of risk and consequence that shape every life.

At its core, the gambler’s blues begins with desire. No one gambles without wanting something—money, escape, excitement, or the intoxicating belief that luck might finally tilt in their favor. The gambler steps into the casino or sits down at the kitchen table with a sense of anticipation that borders on spiritual. The lights glow, the chips clatter, and the world narrows to a single moment where anything seems possible. This is the high that precedes the blues: the belief that one more hand, one more spin, one more roll will change everything. It’s a hope that feels almost righteous, even when the odds are stacked against it.

But the blues arrive when reality reasserts itself. Loss is not just financial; it’s emotional. The gambler feels the weight of choices made in the heat of the moment, choices that seemed brilliant or inevitable at the time but now look reckless in the cold light of dawn. The blues settle in the space between expectation and outcome. They whisper that the gambler should have known better, should have walked away earlier, should have listened to the voice of caution instead of the roar of possibility. This internal conflict—between the dreamer and the realist—is what gives the gambler’s blues its depth.

Yet the gambler’s blues is not simply about regret. It’s also about the strange resilience that follows. After the loss, after the self‑reproach, there is a moment of reflection that can be surprisingly honest. The gambler confronts their own motivations: Why did they take the risk? What were they really chasing? Sometimes the answer is desperation, sometimes boredom, sometimes the need to feel alive in a world that often feels predictable. The blues become a mirror, revealing truths that are easy to ignore when the chips are stacked high and the heart is racing.

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There is also a loneliness to the gambler’s blues. Gambling is often portrayed as a social activity—tables full of people, shared excitement, communal tension—but the emotional aftermath is deeply solitary. No one else feels the exact weight of the gambler’s choices. No one else knows the private hopes that fueled the bets or the personal meaning behind the losses. The gambler sits alone with their thoughts, replaying moments, imagining alternate outcomes, and wrestling with the knowledge that luck is indifferent. This solitude is part of what makes the blues so heavy: it isolates even in a crowded room.

Still, the gambler’s blues is not entirely bleak. Embedded within it is a spark of defiance. The same impulse that drives someone to gamble—the belief that things can change, that fortune can turn, that risk is worth taking—does not disappear after a loss. It lingers, stubborn and persistent. The gambler may feel defeated, but they are rarely broken. The blues becomes a kind of emotional reset, a pause before the next attempt, a reminder that hope is both a burden and a lifeline. This tension between despair and determination is what makes the gambler’s blues so compelling.

On a broader level, the gambler’s blues reflects the human experience of striving for something uncertain. Everyone gambles in some way: on relationships, careers, dreams, or personal transformations. We take risks because we want more than what we have, because we believe in possibilities that are not guaranteed. And when those risks don’t pay off, we feel our own version of the blues. The disappointment, the self‑doubt, the quiet recalibration—these emotions are not limited to casinos. They are woven into the fabric of ambition and desire.

Ultimately, the gambler’s blues is a story of vulnerability. It reveals how deeply we crave change, how willing we are to chase it, and how much it hurts when reality pushes back. But it also shows the resilience that defines the human spirit. Even in the depths of the blues, there is a flicker of hope, a sense that the next hand might be different, that the future still holds a chance worth taking. The gambler’s blues is not just about losing; it’s about learning, enduring, and daring to believe again.

COMMENTS APPRECIATED

EDUCATION: Books

SPEAKING: Dr. Marcinko will be speaking and lecturing, signing and opining, teaching and preaching, storming and performing at many locations throughout the USA this year! His tour of witty and serious pontifications may be scheduled on a planned or ad-hoc basis; for public or private meetings and gatherings; formally, informally, or over lunch or dinner. All medical societies, financial advisory firms or Broker-Dealers are encouraged to submit an RFP for speaking engagements: CONTACT: Ann Miller RN MHA at MarcinkoAdvisors@outlook.com -OR- http://www.MarcinkoAssociates.com

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Filed under: iMBA, Inc. | Tagged: david marcinko | Leave a comment »