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Inheritance tax planning at the end of life

Author

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  • Erixson, Oscar

    () (Department of Economics)

  • Escobar, Sebastian

    () (Department of Economics)

Abstract

There is an ongoing debate about whether inheritance and estate taxes are effective in raising revenues and in contributing to a more equal society. The different views on transfer taxes are largely dependent on beliefs about whether people plan their wealth to avoid these taxes. In this paper, we follow Kopczuk (2007) and study people’s planning response to the onset of terminal illness. An extension of Kopczuk’s work is that we can effectively control for responses in wealth caused by terminal illness but unrelated to tax planning. We do this by exploiting a tax reform in Sweden that removed the incentives for people to plan their estates to avoid inheritance taxation. We find some evidence of long-term terminal illness inducing responses consistent with tax planning, but that these are not widespread or efficient enough to reduce the overall tax burden in the study population. Our results, similarly to those of Kopczuk, show that people appear to postpone some decisions about their estates until shortly before death.

Suggested Citation

  • Erixson, Oscar & Escobar, Sebastian, 2018. "Inheritance tax planning at the end of life," Working Paper Series 2018:5, Uppsala University, Department of Economics.
  • Handle: RePEc:hhs:uunewp:2018_005
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    Cited by:

    1. Savina Princen & Athena Kalyva & Alexander Leodolter & Cécile Denis & Adriana Reut & Andreas Thiemann & Viginta Ivaskaite-Tamosiune, 2020. "Taxation of Household Capital in EU Member States Impact on Economic Efficiency, Revenue and Redistribution," European Economy - Discussion Papers 2015 - 130, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.

    More about this item

    Keywords

    tax avoidance; tax evasion; tax reform; terminal illness;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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