Estate Taxes, Life Insurance, and Small Business

Syracuse University Center for Policy Research Working Paper No. 10

38 Pages Posted: 13 Apr 2011

See all articles by Douglas Holtz-Eakin

Douglas Holtz-Eakin

Independent

John W. R. Phillips

National Institutes on Aging

Harvey S. Rosen

Princeton University - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: April 1, 1999

Abstract

One criticism of the estate tax is that it prevents the owners of family businesses from passing their enterprises onto their children. The problem is that it may be difficult to pay estate taxes without liquidating the business. A natural question is why individuals with such concerns do not purchase enough life insurance to meet their estate tax liabilities. This paper examines whether and how people use life insurance to deal with the estate tax. We find that, other things being the same, business owners purchase more life insurance than other individuals. However, on the margin, their insurance purchases are less responsive to estate tax considerations and they are less likely to have the wherewithal to meet estate tax liabilities out of liquid assets plus insurance.

JEL Classification: H24, M13

Suggested Citation

Holtz-Eakin, Douglas and Phillips, John W. R. and Rosen, Harvey S., Estate Taxes, Life Insurance, and Small Business (April 1, 1999). Syracuse University Center for Policy Research Working Paper No. 10. Available at SSRN: https://ssrn.com/abstract=1807993 or http://dx.doi.org/10.2139/ssrn.1807993

Douglas Holtz-Eakin (Contact Author)

Independent ( email )

No Address Available
United States

John W. R. Phillips

National Institutes on Aging ( email )

Building 31, Room 5C27
31 Center Drive, MSC 2292
Bethesda, MD 20892
United States

Harvey S. Rosen

Princeton University - Department of Economics ( email )

001 Fisher Hall
Princeton, NJ 08544
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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