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The Elgar Companion to Law and Economics, Second Edition

Edited by Jürgen G. Backhaus

This thoroughly updated and revised edition of a popular and authoritative reference work introduces the reader to the major concepts and leading contributors in the field of law and economics. The Companion features accessible, informative and provocative entries on all the significant issues, and breaks new ground by bringing together widely dispersed yet theoretically congruent ideas.
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Chapter 8: Inheritance

Richard E. Wagner


Richard E. Wagner Private property, freedom of contract and personal liability provide the central legal framework for a market economy, as Walter Eucken (1952) explains in his well-known statement of Ordnungstheorie. While there is little dispute about the principal features of this framework, there is much dispute about the status of property when the owner dies. There are two polar regimes in this regard, free inheritance and collective inheritance. Under free inheritance, an owner of assets would have the same right to dispose of his assets upon death as he had during life. Any state involvement would be minimal, as illustrated by such things as the usual recordation fees charged when certain asset titles are transferred. Under collective inheritance, an owner of assets would have the full use of his assets only during his lifetime, and those assets would become state property upon his death. Collective inheritance would entail the imposition of a 100 per cent tax on all assets that were held by a decedent at the time of death. A pure regime of collective inheritance is almost certainly impossible in modern societies. There are several related reasons why any effort to tax estates at 100 per cent would collect little, if any, revenue. The effort to impose such a tax would induce people who had accumulated wealth during their lifetime to consume it before their death, by doing such things as converting that wealth into annuities. It would also induce such people to transfer more of their wealth...

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