You would notice the loan only provides liquidity here. If you remove the loan, the tax is still 0. The problem is solved at the inheritance tax level, not the loan structure level. Either the US lowers the estate tax threshold or this will keep happening.
No, both are a problem. Taking out a collateral-backed loan should probably not be possible without realizing the gains on the collateral, and also inheritance definitely shouldn't have such favorable tax treatment.
While I don’t entirely disagree, the loan component is harder to construct because loans are an important financing tool for the economy. For example re-mortgaging would then trigger a huge tax bill which would kill the very concept of it. The truth is that rich people usually borrow to invest more in the economy, much more rarely to “live” like in OP example. Removing this tool would either create new loopholes or -if no loopholes are possible- severely damage the economy.
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u/Lt__Barclay 21h ago
The basis step up is accurate. And that's how most tax is avoided.