The “Buy, Borrow, Die” playbook sounds simple: acquire assets, borrow against them instead of selling, let the debt expire when you do. This Anglo-Saxon wealth hack has fueled Silicon Valley fortunes and American dynasties for decades. But transplant it to French soil and the model hits a concrete wall called droits de succession (inheritance taxes).
A French solopreneur recently asked whether this concept even exists in France. The answer is yes, but it wears a very different, far less attractive costume.
How the Anglo-Saxon Model Works (And Why France Is Different)
In the US version, you buy appreciating assets (stocks, real estate), borrow against their value at low interest rates, and live off the loans. Since loans aren’t income, you pay no capital gains tax. When you die, your heirs inherit the assets with a “stepped-up basis”, the asset’s value is reset to its price at your death, erasing capital gains liability. The estate sells a portion to cover the debt, and everyone walks away richer.
France has no such stepped-up basis. Your heirs inherit your original cost basis and face inheritance taxes up to 45% in direct line (parent to child) and 60% for unrelated beneficiaries. The debt might die with you, but the tax bill comes alive with a vengeance.
The “Buy” Phase: Building Your French Asset Pile
French investors do accumulate assets through leverage, but the motivations differ. For middle-class households, this means a crédit immobilier (mortgage) on their résidence principale (primary residence). For wealthy entrepreneurs, it involves structured acquisitions via SCI (Société Civile Immobilière, a real estate investment company) or holding companies.
Many young French investors are building real estate empires instead of counting on pensions, driven by skepticism about the state pension system. They’re buying multiple properties, often using SCIs to separate ownership from management and facilitate intergenerational transfers. This trend aligns with the “buy” component, but the financing structure reveals key differences.
French real estate investment challenges and shifting strategies away from buy-to-let
The “Borrow” Phase: Lombard Loans and Equity Release
Here’s where French finance gets interesting. High-net-worth individuals access crédit lombard (Lombard loans), credit lines secured by financial assets like stocks, bonds, or investment funds. You pledge your portfolio, borrow up to 60-70% of its value, and use the cash for living expenses or further investments. Interest rates are relatively low, and you never trigger capital gains.
One commenter confirmed: “Oui ça se fait bien, je le fais en tant que TNS (travailleur non salarié, self-employed) avec société d’exploit et sci sous holding.”
For older property owners, the prêt viager hypothécaire (lifetime mortgage) offers another route. The Banque Populaire Caisse d’Epargne (BPCE) group recently relaunched these loans after a 2019 pause. Borrowers over 60 can access roughly one-third of their property’s value, pay no monthly installments, and settle the debt only upon death from their estate.
Unlike a traditional viager sale, where you sell your property to an investor who pays a lump sum plus lifetime annuity and bets on your early demise, the prêt viager hypothécaire keeps ownership in your hands. Your heirs inherit the property, minus the accumulated debt.
Impact of high interest rates on property financing and debt capacity
The “Die” Phase: Where French Tax Law Ruins the Party
This is the dealbreaker. French inheritance law doesn’t forgive, it demands payment. When you die, your heirs face:
- 45% tax on inheritances above €100,000 per child (the allowance renews every 15 years)
- 60% tax for siblings, nephews/nieces, or unrelated beneficiaries
- Additional social charges on certain assets
The debt you accumulated through Lombard loans or equity release gets deducted from your estate’s value, reducing the taxable base. But this merely shrinks the tax bill, it doesn’t eliminate it. Your heirs still pay hefty droits de succession on the remaining assets.
Compare this to the Anglo-Saxon model where heirs inherit tax-free. In France, the “die” part means your family might need to fire-sale assets to cover taxes, precisely what the strategy aims to avoid.
French Workarounds: Gifts, Insurance, and Ownership Tricks
Savvy French families use alternative structures to approximate the strategy’s benefits:
Donations (Gifts)
Each parent can gift €100,000 per child tax-free every 15 years. Start early, and you transfer significant wealth before death. The catch: gifted assets are reintegrated into the estate at their current market value to calculate the réserve héréditaire (forced heirship reserve). If values have risen dramatically, your heir might owe compensation to siblings.
Assurance-vie (Life Insurance)
This is France’s closest equivalent to the American stepped-up basis. Premiums paid before age 70 benefit from a €152,500 tax-free allowance per beneficiary, with favorable tax rates beyond that. The capital grows tax-deferred, and you can borrow against it. Upon death, proceeds bypass inheritance tax up to the allowance limits and pass directly to designated beneficiaries.
Low returns on safe French savings vehicles pushing investors toward alternative strategies
Démembrement de propriété (Split ownership)
Separate nue-propriété (bare ownership) from usufruit (usufruct/right to use). Donate the nue-propriété to heirs while retaining the usufruit. They pay reduced gift taxes based on a percentage of the property’s value (determined by your age), and upon your death, full ownership reconstitutes automatically without additional tax.
Regulatory risks in French investment accounts like the PEA
The IFI Wealth Tax Complication
If your net real estate assets exceed €1.3 million, you owe the IFI (Impôt sur la Fortune Immobilière, real estate wealth tax) annually at rates from 0.5% to 1.5%. Borrowing against your property reduces the taxable base (since debt is deductible), creating a perverse incentive to maintain leverage. However, the interest costs often exceed the tax savings, making this a questionable strategy unless you have high-return investments for the borrowed cash.
Risk Assessment: What Could Go Wrong?
Interest Rate Risk
French borrowers learned this lesson harshly. Variable-rate loans can destroy cash flow when rates rise. Even fixed-rate Lombard loans face renewal risk, banks can adjust terms when the credit line matures.
Liquidation Risk
If your pledged assets drop below the loan-to-value threshold, the bank issues a appel de marge (margin call). You must inject cash or sell assets at the worst possible time. During market crashes, this can wipe out generations of wealth.
Concentration Risk
Borrowing to accumulate more of the same assets, typically French real estate, creates dangerous concentration. A property market downturn simultaneously hits your asset values and your ability to refinance.
Advanced investment options beyond tax-advantaged accounts for growing wealth
The Verdict: A Modified French Version Exists, But It’s Not Pretty
Can you execute “Buy, Borrow, Die” in France? Technically yes, but it’s a pale imitation:
- Buy: Use leverage, but face higher taxes and social charges
- Borrow: Access Lombard loans and equity release, but at higher rates than US equivalents
- Die: Watch your heirs pay 45-60% inheritance tax, destroying the strategy’s core benefit
The strategy works best for the ultra-wealthy who can afford complex holding structures, cross-border planning, and expensive tax lawyers. For the merely affluent, the costs and risks often outweigh the benefits.
Rise of real estate as a wealth-building tool amid pension uncertainty
Practical Takeaways for French Residents
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If you’re under 50: Focus on maximizing assurance-vie and making strategic donations every 15 years. Don’t count on debt as a tax strategy.
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If you’re over 60: Consider a prêt viager hypothécaire only if you need liquidity and want to stay in your home. It’s not a wealth-building tool, it’s a retirement supplement.
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If you’re wealthy: Explore Lombard loans for short-term liquidity needs, but avoid using them for long-term living expenses. The interest compounds while your assets remain exposed to market risk.
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For everyone: The French system’s complexity means professional advice isn’t optional. A single mistake in structuring a donation or SCI can cost more in taxes than the assets are worth.
The Anglo-Saxon “Buy, Borrow, Die” strategy assumes a tax system that rewards patience and punishes sales. France does the opposite: it punishes death and rewards transfers during life. Your best bet isn’t to borrow against your assets, it’s to give them away while you’re still breathing.
Comparative financial analysis of property ownership vs. renting in modern France
Bottom line: In France, the strategy should be “Buy, Gift, Live.” Borrowing is optional, tax-efficient transfer is mandatory. Your heirs will thank you for planning around the fisc (tax authorities) rather than trying to outsmart them with debt.
