How/why to borrow against assets?

What is the end game?

It depends upon the tax jurisdiction that you are subject to.

Step Up In Basis v. Estate Taxation In A U.S. End Game

In the U.S., if you hold onto a capital asset until death, the untaxed and unrealized capital gains in an appreciated asset are eliminated by operation of law and your heirs can sale the asset as if they purchased it for fair market value on the date of your death.

This is called the step up in basis.

This end game use to have a pretty narrow niche application because holding onto an asset until death also insures that it is part of your taxable estate for estate tax purposes valued at fair market value on the date of death, and the estate tax rate is much higher than the capital gains tax rate. When the lifetime exemption per person of combined gifts not exempt from gift taxation and assets owned at death was $600,000, as it was in the late 1990s, avoiding estate taxes was a bigger priority than avoiding capital gains taxes.

But now that the lifetime exemption is about $11,700,000 for people dying in 2021, is indexed for inflation, and unused exemption amounts are inherited by a surviving spouse, a lot more people with significant capital gains don't have to worry about estate taxes, so this kind of strategy makes more sense.

Canada Does Not Have The Step Up In Basis

In contrast, for example, in Canada, appreciated assets held at death are treated as sold at death and the unrealized gains are subject to capital gains taxes at death, with some adjustments. So, this strategy makes much less sense for Canadians than it does for Americans, because Canadians don't have the same end game.

Deferring Taxes Has Value

Also, it is worth recognizing that simply deferring taxation, even if you end up paying exactly the same amount of tax in the end, has significant economic value. Most people's intuitive estimates of the economic benefits of deferring taxation greatly underestimate its value.

For example, while it is not intuitively obvious, the tax benefit of a Roth IRA in which you contribute aftertax dollars and pay no tax on the appreciation or proceeds of the investment is (if you are in the same tax bracket from start to finish and the investment return rates are the same) equivalent in economic benefit to a Traditional IRA in which you contribute before tax dollars and pay tax when you take the money out. This is true even though in the Traditional IRA all of the tax benefits that you receive are purely from deferring taxation, and not from actually having any part of the income you put in or the income you earn over time from appreciation and proceeds of the investment made exempt from ultimately being taxed.

Deferring Capital Gains Taxes With 1031 Exchanges In The U.S.

In the U.S., if your investment is in real estate, you can continuing replacing one real estate investment with another without triggering capital gains transaction through a device known as a 1031 exchange. The way that 1031 exchanges work with debt encumbered properties is complicated, but it isn't impossible to use the same basic concepts in a 1031 exchange real estate context (it is complicated, however). This can make decades of capital gains tax deferral possible even though you are actively buying and selling investment real estate.