In a society focused on fairness, fairness is the last thing our laws of inheritance provide. The debate rages on: should the government have a significant say in how we distribute our assets after death, or should individual responsibility reign supreme? Wealth redistribution sounds good in principle. At the same time, I think excessive government involvement in inheritance matters threatens personal liberty and often creates unintended consequences that ultimately harm future generations.
In my work, I’ve witnessed the ever-growing complexities and emotional upheaval that often accompany the struggle for inheritance. Splitting up the assets is almost never that cut and dry. From dealing with tricky family dynamics and paying tribute to legacies, to protecting the financial future of those you hold dear, the government should try to level the playing field. Its participation can be overbearing, introducing unnecessary bureaucracy and heightening tensions in a sensitive environment.
Another top reason opponents argue against the need for government intervention is the destruction of property rights. It’s true—we work harder than anyone and earn huge sums of money. We ought to have the freedom to determine how that wealth is shared once we pass on. Opponents of inheritance taxes have long noted that these taxes, much like income taxation, are just taxes on success that disincentivize saving and investment. Why should any government entity come in and just take away the majority of what we’ve built in a lifetime of work?
Consider community property states like California or Texas, where the surviving spouse automatically inherits a significant portion of the deceased's estate. This can provide much-needed economic stability for many. It does limit a decedent’s ability to provide for other important family members or to really support the causes they care about. In Louisiana, the civil code tradition’s law of forced heirship further complicates issues surrounding inheritance. It bars parents from disinheriting their adult children, regardless of the circumstances. These laws seek to safeguard loved ones. They can give rise to anger and animosity, particularly in blended families or where kids have grown distant.
I get the argument for progressive wealth redistribution. The notion of bridging divides and lifting up the unlucky through opportunity is seductive. A common proposal these days is to raise inheritance taxes in order to raise money. This funding in turn largely fuels social infrastructure designed to empower communities and fund robust public services. The truth is usually much less straightforward.
First, inheritance taxes are extraordinarily wasteful. Wealthy people are already vigorously incented to evade or dodge taxes. By employing cutting-edge estate planning techniques, moving assets into tax-preferred vehicles, or even moving to tax investor-friendly jurisdictions, they simply avoid responsibility. This detail severely erodes the modest revenue produced. It creates an environment that allows the rich to avoid paying what they owe, sticking middle-class families with an unreasonable load.
Second, in the form of lost economic opportunity. The new-Carnegie-Conjecture claims that large inheritance taxes can reduce individuals’ incentives to labor and accumulate capital. When people understand that a significant portion of their savings will be taxed away at death, they might opt to work less. This can only result in reduced productivity, reduced economic growth, and in the end, less wealth to redistribute.
Additionally, government action can inhibit philanthropic endeavors. When more than half of an estate is lost to taxes, there’s little motivation to leave money for philanthropic endeavors. As a result, too many people think about tax avoidance first rather than fueling the governments and nonprofits they love. In turn, they pull dollars out of the non-profit sector.
I’m not arguing that we do away with all estate taxation. A reasonably sized inheritance tax — combined with appropriate estate planning — can meet the nominal expectations of individual legacy with the collective expectation of society. We must be wary of excessive government intervention that undermines individual autonomy, discourages saving and investment, and creates unintended economic consequences.
The goal must be building a true level playing field with policies that expand education, opportunity and economic mobility. Rather than simply redistributing wealth after death, we should strive to create a society where everyone has the chance to build their own wealth and achieve financial security.
Join us as we unpack the nuance of today’s evolving families. It’s time to make sure that our inheritance laws can change to meet the needs of a changing world. Adoption practice, legislation, and regulation can be extremely different from one state to the next. In other states, adoptees are entitled to inherit from both their birth and adoptive families. Similarly, elective community property systems, like those in Tennessee and Kentucky, offer residents and non-residents the option to create community property through trusts, providing greater control over asset distribution.
Ultimately, the debate over government intervention in inheritance matters boils down to a fundamental question: who has the right to decide how our assets are distributed after we're gone? The federal government has always had a critical role in leveling the playing field and safeguarding against abuse. We need to protect against designing a system that punishes success, disincentivizes philanthropy, and restricts personal choice. Let's strive for a balanced approach that respects individual rights while promoting a more equitable and prosperous society for all. The future of how we pass down wealth to our descendants hangs in the balance.
