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Monday, February 15, 2016

How to make inheritance fairer

An article from www.bbc.com caught my eye, as it is talking about ways in which inheritance may be equalized among people in general. The idea is to make sure that everyone gets some amount of inheritance even if they come from families in which their own parents don't have anything to leave them. This would be a huge shift away from our centuries-old tradition of parents handing down their life savings only to their own children (or others whom they choose to benefit).

The article, which you can see by clicking here, talks to various people who have put forward three ideas for achieving equality of inheritance (which is referred to as "fairness"). The third idea, which is to tax "old money" differently than what is apparently regular money, would seem more applicable to England than to us here in Canada. The second idea, which has to do with equalizing the genetic inheritance before the financial inheritance, I found too strange to consider an actual proposal for change. The first idea is one that people will understand but, in my opinion, will not welcome: it involves taxation on inheritances so that they can be shared.

I'm not completely sold on the underlying premise of the article, that being that inheritances should be made more "fair". It seems to me that where parents have invested in an education or have taken the risk to start up businesses, have worked hard, made financial sacrifices, and saved diligently, they should be able to choose to whom they leave their money. Sharing out inheritance by way of taxation seems to punish those who work and save. Receiving an inheritance is not a societal right at present. Or am I simply being resistant to change?

How would you feel about a federal tax on inheritance for the purpose of providing an inheritance to people who currently will not receive one?

11 comments:

  1. A tax federal tax on inheritance for the purpose of providing an inheritance to people who currently will not receive one?
    Sounds socialistic to me.
    Perhaps parents have worked hard but many of the children that receive large heritances have not worked for it. They just won the lottery. In some ways the US system makes a lot of sense. Having said that, I prefer to leave the Canadian of no taxaction of inheritance as it is. I have 2 children. If I didn't have any children I would probably see it differently.
    Perhaps very attractive people should pay a special tax that is shared among the less attractive people.
    Socialism is all about fairness for most but not for all. Capitalism may not be perfect but many believe it is still the best that we have. Who said life is fair?

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  2. Many people who work hard and have money to leave to their children have also given generously to charities over the years. This has helped to provide funds to those who would otherwise not have access to certain services. It's certainly not the government's business to whom I will leave an inheritance.

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    Replies
    1. Excellent point. Canadians are very generous contributors to charities.

      Lynne

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  3. Let me get this straight: Taxes have already been paid on the savings, but the government would tax those funds again and give those proceeds to complete strangers? Yikes! If this comes to Canada, we'll have even fewer savers than we do now!

    ReplyDelete
    Replies
    1. We'd also have a lot more home-made estate planning solutions taking place, such as parents putting kids' names on assets to keep them out of probate. This is dangerous for the parents due to risk of loss of the assets, but who could blame them for taking the risk? We'd see a lot more planning to divest parents of assets before death.

      Lynne

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  4. Canada may not have an inheritance tax as such, but estates with no surviving spouse pay income tax on almost all financial assets (except primary residences and designated life insurance policies), as the deceased is assumed to have sold them the moment before death.

    This does not seem to be the case in the U.K., according to the links I have read i.e.https://www.moneyadviceservice.org.uk/en/articles/calculating-and-paying-tax-after-someone-dies

    So, in a way, Canadian heirs have "shared the wealth" even with no inheritance tax as such.

    ReplyDelete
    Replies
    1. Yes, you're right. Although the tax has never specifically been designated as sharing of inheritance, the funds have been shared.

      Lynne

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  5. Let's not forget Probate. They don't call it a tax but it is. What is that money used for? Perhaps it could be used to help those who did not get their fair share of an inheritance.
    I don't think Canadians want to open up this can of worms.

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  6. This sounds like yet another idea put forward by members of the "me" generation, with that ingrained & unshakable sense of entitlement.

    Life isn't fair. If your parents are poor you never had much growing up either so why should there be a windfall after they're dead.
    If your parents have money and you want an inheritance then earn it: Take better care of your folks while they're alive.

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    Replies
    1. I completely agree with everything you said.

      Lynne

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