Giving… Estates v. Gifts
I had a post the other day about inheritance taxes. One of my contentions in the post that generated some heat was that in general people (including those who leave behind estates) are more concerned with maintaining control of their wealth (in some cases, even beyond death – consider all the wills that have stipulations) than they are with passing on assets to their heirs. In other words, passing on assets is nice, but keeping control is nicer.
Some commentators disagreed. I note that when I used to teach and would bring this up in class (I taught in the MBA program of a school well known for having extremely wealthy students), this was also a bone of contention. The argument against my position is essentially that people’s behavior toward estates relative to their behavior toward gifts is essentially due to the legal structure. For example, there is a big industry in “life insurance” that basically amounts to methods of evading estate taxes using loopholes often obtained by the lobbying efforts of the big accounting and law firms.
The problem with this argument is that laws are societal constructs. Those who put their efforts into finding ways to evade estate taxes could well have put the same amount of effort into finding ways to evade gift taxes, and they would have, had there been as much of market for evading gift taxes as there is for evading estate taxes. And yes, some people do look for and find ways to evade gift taxes. But when was the last time you heard about a gift tax planner, and how big is that industry relative to the estate tax planning industry?
Your opinion – how big is the bequest motive relative to the personal greed motive? How can this be tested?