Integration of Income and Estate Tax Planning
The Journal of Wealth Management, Summer 2021, 24 (1) 78-104; DOI: https://doi.org/10.3905/jwm.2021.1.134
50 Pages Posted: 2 Oct 2020 Last revised: 26 Jul 2021
Date Written: August 28, 2020
Preservation and transfer of wealth to future generations is one of the central financial goals for most high-net-worth families. In this study, using a stylized theoretical model and Monte-Carlo simulations, we quantify the benefits of income and estate tax planning for growing wealth over generations. We show that a family that invests with income and estate tax efficiency in mind can achieve substantially higher wealth levels than a family oblivious to taxes. More importantly, we show that there is a significant value in integrating income tax efficiency and estate tax planning: Becoming efficient with respect to one tax should make the family even more eager to become efficient with respect to the other.
Keywords: Wealth Preservation, Income Tax, Estate Tax, Trusts, GRATs
JEL Classification: G11, G51, H24
Suggested Citation: Suggested Citation