Estate Taxes, Life Insurance, and Small Business

39 Pages Posted: 15 Mar 2000 Last revised: 11 Feb 2021

See all articles by Douglas Holtz-Eakin

Douglas Holtz-Eakin

Syracuse University; National Bureau of Economic Research (NBER)

John W. Phillips

University of Pennsylvania

Harvey S. Rosen

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

Date Written: September 1999

Abstract

One criticism of the estate tax is that it prevents the owners of family businesses from passing their enterprises to 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.

Suggested Citation

Holtz-Eakin, Douglas and Phillips, John W. and Rosen, Harvey S., Estate Taxes, Life Insurance, and Small Business (September 1999). NBER Working Paper No. w7360, Available at SSRN: https://ssrn.com/abstract=194668

Douglas Holtz-Eakin (Contact Author)

Syracuse University ( email )

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National Bureau of Economic Research (NBER)

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John W. Phillips

University of Pennsylvania

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Harvey S. Rosen

Princeton University - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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United States

CESifo (Center for Economic Studies and Ifo Institute)

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Germany

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