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Bequest and Tax Planning: Evidence from Estate Tax Returns

  • Wojciech Kopczuk

    (Department of Economics and School of International and Public Affairs, Columbia University and NBER)

I study bequest and wealth accumulation behavior of the wealthy (subject to the estate tax) shortly before death. The onset of a terminal illness leads to a very significant reduction in the value of estates reported on tax returns-fifteen to twenty percent with illness lasting "months to years" and about five to ten percent in the case of illness reported as lasting "days to weeks." I provide evidence suggesting that these findings cannot be explained by real shocks to net worth, such as medical expenses or lost income, but instead reflect "deathbed" estate planning. The results suggest that wealthy individuals actively care about disposition of their estates but that this preference is dominated by the desire to hold on to their wealth while alive. (c) 2007 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology..

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Article provided by MIT Press in its journal Quarterly Journal of Economics.

Volume (Year): 122 (2007)
Issue (Month): 4 (November)
Pages: 1801-1854

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Handle: RePEc:tpr:qjecon:v:122:y:2007:i:4:p:1801-1854
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  12. Kopczuk Wojciech & Slemrod Joel, 2005. "Denial of Death and Economic Behavior," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 5(1), pages 1-26, August.
  13. Jonathan Skinner & Stephen P. Zeldes, 2002. "The Importance of Bequests and Life-Cycle Saving in Capital Accumulation: A New Answer," American Economic Review, American Economic Association, vol. 92(2), pages 274-278, May.
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  15. Poterba, James, 2001. "Estate and gift taxes and incentives for inter vivos giving in the US," Journal of Public Economics, Elsevier, vol. 79(1), pages 237-264, January.
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