Integration of Income and Estate Tax Planning

50 Pages Posted: 2 Oct 2020 Last revised: 13 Oct 2020

See all articles by Nathan Sosner

Nathan Sosner

AQR Capital Management, LLC

Joseph Liberman

AQR Capital Management, LLC

Steven Liu

AQR Capital Management, LLC

Date Written: August 28, 2020

Abstract

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

Sosner, Nathan and Liberman, Joseph and Liu, Steven, Integration of Income and Estate Tax Planning (August 28, 2020). Available at SSRN: https://ssrn.com/abstract=3684883 or http://dx.doi.org/10.2139/ssrn.3684883

Nathan Sosner (Contact Author)

AQR Capital Management, LLC ( email )

One Greenwich Plaza
Greenwich, CT 06830
United States

Joseph Liberman

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

Steven Liu

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

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