> that rate will be more than the risk free rate.

For rich individuals it could be the risk free rate. Banks can curry favor with rich individuals and gain other business if they do this.

> are making a mistake, because eventually you need to sell assets to dispose of the loan, and that's when you pay taxes on the realized gains, with interest

You seem clued in to this stuff. You really haven't heard of Buy-Borrow-Die?

https://smartasset.com/investing/buy-borrow-die-how-the-rich...

> Treat inheritance income as income

That works too.