Choosing between Gifts and Bequests: How Taxes Affect the Timing of Wealth Transfers

44 Pages Posted: 2 Feb 2005 Last revised: 18 Aug 2010

See all articles by David Joulfaian

David Joulfaian

U.S. Department of the Treasury, Office of Tax Analysis (OTA); Georgetown University - Department of Economics

Date Written: January 2005

Abstract

A number of theories have been advanced to explain the size and timing of intergenerational transfers. One factor only recently explored is the effects of taxes, and in particular the estate tax, on such transfers. This paper represents the first attempt to explore how capital gains and gift taxes, in addition to the estate tax, interact to influence incentives in the timing of transfers. Using estate tax data and exploiting variations in state inheritance, gift, and capital gains tax rates, this paper finds taxes to be an important consideration in the choice between gifts and bequests. In particular, each of capital gains and gift taxes are found to be important determinants of the timing of transfers. These findings are robust to a number of specifications that control for borrowing, charitable bequests, marital status, and the portfolio composition of wealth transfers.

Suggested Citation

Joulfaian, David, Choosing between Gifts and Bequests: How Taxes Affect the Timing of Wealth Transfers (January 2005). NBER Working Paper No. w11025. Available at SSRN: https://ssrn.com/abstract=645267

David Joulfaian (Contact Author)

U.S. Department of the Treasury, Office of Tax Analysis (OTA) ( email )

1500 Pennsylvania Ave. NW
Washington, DC 20220
United States

Georgetown University - Department of Economics ( email )

37th St NW & O St NW
Washington, DC 20007
United States

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