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Choosing between gifts and bequests: How taxes affect the timing of wealth transfers

  • Joulfaian, David

A number of theories have been advanced to explain the size and timing of intergenerational transfers. One factor only recently explored is the effects of taxes, and in particular the estate tax, on such transfers. This paper represents the first attempt to explore how capital gains and gift taxes, in addition to the estate tax, interact to influence incentives in the timing of transfers. Using estate tax data and exploiting variations in state inheritance, gift, and capital gains tax rates, this paper finds taxes to be an important consideration in the choice between gifts and bequests. In particular, each of capital gains and gift taxes are found to be important determinants of the timing of transfers. These findings are robust to a number of specifications that control for borrowing, charitable bequests, marital status, and the portfolio composition of wealth transfers.

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 89 (2005)
Issue (Month): 11-12 (December)
Pages: 2069-2091

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Handle: RePEc:eee:pubeco:v:89:y:2005:i:11-12:p:2069-2091
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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  2. Bernheim, B. Douglas & Lemke, Robert J. & Scholz, John Karl, 2004. "Do estate and gift taxes affect the timing of private transfers?," Journal of Public Economics, Elsevier, vol. 88(12), pages 2617-2634, December.
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  17. Joulfaian, David, 2000. "Taxing Wealth Transfers and Its Behavioral Consequences," National Tax Journal, National Tax Association, vol. 53(n. 4), pages 933-58, December.
  18. James Poterba, 1997. "The Estate Tax and After-Tax Investment Returns," NBER Working Papers 6337, National Bureau of Economic Research, Inc.
  19. Lee, Lung-fei & Maddala, G S & Trost, R P, 1980. "Asymptotic Covariance Matrices of Two-Stage Probit and Two-Stage Tobit Methods for Simultaneous Equations Models with Selectivity," Econometrica, Econometric Society, vol. 48(2), pages 491-503, March.
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