Deathbed tax planning

Wealth, gifts and estate planning at the end of life

“…Comparing those who died of 'sudden' causes of death to those who died of 'nonsudden' causes of death, Suari-Andreu et al (2019) find that wealth at the start of the year of death is around 5% lower for both couples and singles in the latter group. However, in their sample of married individuals, Erixson and Escobar (2020) find no difference in estate size between those who died suddenly and those who died after a period of illness.…”

“…Finding that the latter left estates that were 10%-18% larger in value, and arguing that income and medical expense shocks could not explain the magnitude of difference, he concluded that wealthy individuals engage in 'estate planning' before death. Suari-Andreu et al (2019) and Erixson and Escobar (2020) combine administrative data on cause of death with administrative data on wealth and estates in the Netherlands and Sweden, respectively, to implement a similar research design. Comparing those who died of 'sudden' causes of death to those who died of 'nonsudden' causes of death, Suari-Andreu et al (2019) find that wealth at the start of the year of death is around 5% lower for both couples and singles in the latter group.…”

“…One approach has been to exploit variation in the time available to individuals to conduct estate planning and to compare the estates of those who died after a period of prolonged illness to the estates of those who died suddenly and to attribute the difference to estate planning (Kopczuk (2007); Erixson and Escobar (2020)). This type of research design relies upon having data that can be used to identify whether (and potentially for how long) individuals had a health condition that made their death more likely.…”

“…These findings suggest that it is important to use individual-level information that can more closely capture how long an individual is in ill-health before their death, if exploiting the 'sudden deaths' research design. For example, direct measurement of time spent in ill-health is used in Kopczuk (2007) and Erixson and Escobar (2020), while Suari-Andreu et al ( 2019) remove some individuals from the 'sudden death' group if they were previously hospitalised with the condition that led to their death. It is not clear that exploiting cause of death alone is well-suited for classifying deaths as anticipated or unanticipated.…”

Behavioral Responses to Inheritance and Gift Taxation: Evidence from Germany

“…They utilize a one-time opportunity to reduce their tax liability by transferring part of their inheritance to their children. Other individuals engage in deathbed tax planning [Kopczuk 2007], although not in Sweden [Erixson and Escobar 2020].…”