Estate taxes, life insurance, and small business

Douglas Holtz-Eakin, John W.R. Phillips, Harvey S. Rosen

Research output: Contribution to journalArticle

11 Scopus citations

Abstract

Critics argue that the estate tax prevents the owners of family businesses from passing their enterprises to heirs because it is difficult to pay estate taxes without liquidating the business. Why don't owners purchase enough life insurance to meet their estate tax liabilities? We examine whether and how people use life insurance to deal with the estate tax. We find that, ceteris paribus, business owners purchase more life insurance than do 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.

Original languageEnglish (US)
Pages (from-to)52-63
Number of pages12
JournalReview of Economics and Statistics
Volume83
Issue number1
DOIs
StatePublished - Feb 2001

All Science Journal Classification (ASJC) codes

  • Social Sciences (miscellaneous)
  • Economics and Econometrics

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