Why not give away the money to a charity or the government once someone dies?
You could even have a system that limits how much money parents can give to their children while the parents are still alive, again, in the interest of fairness.
Now that was a system that cried out for reform and it was reformed, in time, to the point where legislatures abolished the fee-tail system in favor of a "fee simple" system - meaning that, once property was transferred, the transferee had the full bundle of rights relating to its disposition, including the power to alienate it during that person's lifetime and the power generally to bequeath it to whomever that person desired.
In the midst of this, the law injected value judgments of varying types, one of which was to favor children, meaning that if someone died intestate (without a will), the law set up default categories by which the decedent's property would pass, and this routinely favored spouse first and then direct lineal descendants, i.e., children. Indeed, even if a testator (person with a will) intended to disinherit children, he had to follow prescribed forms for doing so or the law would presume that he intended to leave appropriate shares to all children.
This is the legacy we have in the United States from the English common law tradition. It is based fundamentally on the idea of private property and on laws promoting what we today call the "nuclear family." And this is, by and large, the way the law has continued to this day, though the idea of "family" has broadened somewhat.
In theory, none of this needs to be as it is. If the state reigned supreme in people's lives, and if private property were regarded as an evil, then confiscatory policies could be enacted as desired. Of course, if one's estate were to be routinely confiscated upon one's death, then the equivalent of the modern "gift tax" proscription would also need to be in place, preventing a living person from making inter vivos transfers to his children as a way of circumventing the ultimate confiscation that society deemed to be fair. This would mean that the idea of "private property" would become largely illusory. No one would own property as such. Rather, each person would have a lease of sorts on property during one's lifetime, with a reversionary interest held by the government.
Since such a system would ultimately lead to widespread government confiscation, it would not long leave us with a free society but rather one in which we each would be required to seek permission from the sovereign state to use "its" resources as its bureaucrats and regulators deemed just.
The modern estate tax doesn't do this because, even while it seeks to promote the idea of busting up large estates at a person's death in the name of fairness, it comes nowhere close to doing this. The vast majority of average middle class people have always fallen under the minimum threshold such that the tax has not applied to them and, if it has, it has applied in a comparatively innocuous way - that is, it has imposed a tax on some portion of the estate such that the heirs still retained the larger portion. For extremely wealthy people, a system of foundations has been established by which the heirs can effectively control the family fortune even as it bypasses the normal estate-tax mechanism.
Thus, the question becomes, is the fee-simple form of property ownership, with its system of vesting the full powers of ownership and disposition in the hands of private individuals largely free from the authority of the state, a system in need of reform in the same way that, say, the old fee-tail system cried out for reform?
This is ultimately a question of the values a society seeks to reflect, with a state-run society of individuals largely beholden to the government for major elements of their subsistence versus a society grounded in individual rights, as best summed up in the Declaration of Independence, who are free to engage in "life, liberty, and the pursuit of happiness" free of the influence of the state. "Fairness" in this context in a purely subjective term rooted in one set of values or the other.
It took centuries to move from a system of medieval serfdom to a system of fee-tail to a private property system of fee-simple ownership. I doubt that we would want to throw the modern system of property ownership away without some pretty careful thought and not without careful consideration of what has happened (or one might say the horrors of what has happened) in societies that do not respect private property ownership.
If it is suggested, hypothetically, that the ability to pass wealth to children is _not_ a material reason for people to work to accumulate it, it may nevertheless be the case that their incentives to work are contingent upon indirect conceptual ligaments of their children's prospective inheritance. For example, they may make certain assumptions about the life their children would be able to lead in connection with - but not exclusively because of - property they may come to possess.
Edit: In addition to possibly removing an incentive, it may even go so far as to create an explicitly negative _disincentive_ for many people--people who believe the government is least morally entitled and least competent to dispose of their money. Like it or not, many people who possess the ability and the inclination to accumulate wealth for themselves through the transaction of commerce of some description feel this way about the government, precisely because the government supports those who lack that ability or desire. Wealthy people feel that that choice is for others to make for themselves (or, if the choice is truly not theirs, gain or suffer from as a consequence of certain natural and inexorable variations in the content of people's lives and the limitations of their abilities and intelligence), but not one that should have repercussions for them and the choices _they_ have made.
To prevent gift giving, you would need to cap prices, since otherwise the parent could purchase a low cost item for a high price. For example, paying the child $1m for the 1976 Camino as described below by noonespecial.
In such a system we could presumably rely on the government to make a judgement as to what did or did not constitute inheritence, gift giving etc; but the extent to which the free exchange of goods and setting of prices was possible would be greatly restricted.
Ah well, I'll answer the question posed. To me the only reason to reward different people differently is to create incentives to motivate people to produce more. Inheriting great wealth takes people who likely have the ability to produce and robs them of the incentive. Therefore I find myself in complete agreement with Warren Buffett that a very rich person should leave his kids enough to do anything but not enough to do nothing.
Except that you didn't, you know. You said what rich people should do with their money. The question was what rich people should be allowed to do with their money. And that is really a very different question.
No, the question was, what people should be allowed to do with their money.
My answer: rich or poor, it's your money, and you should be allowed to buy anything you want with your money, including comfort for your children and fish.
"Why not give away the money to a charity or the government once someone dies?"
If anyone is less deserving of my money than my children after I die, it's the government. They squander it now while I'm watching, I shudder to think what they'll do with it when my eyes are closed.
The problem with extreme libertarianism is that property rights fall apart without the constant intervention of the legal profession, including government run police. This requires more government and consent from fellow citizens than most libertarians seem to want to acknowledge.
> No, the question was, what people should be allowed to do with their money.
You are correct, of course.
That's the rational. I earned it, so I decide who gets it. Usually my kids. YMMV from country to country, and state to state yadda.
2. Why not mind your own business. I worked for it, and I'll decide what to do with it. If you'd like to decide the fate of vast wealth, than go earn vast wealth.
3. You could even have a system that prevents people from whinging about how unfair life is on the internet whilst some people don't even have benefit of a decent soapbox, but it wouldn't make much sense either.
How exactly is "fairness" defined? I see that word used in discussions of social matters ("fair-trade coffee", "fair wages", "fair share of taxes") and it's assumed that everyone is just going to have the same idea of "fair" (or not bothering analyzing what the word is supposed to mean in the given context), and think, hey, *fair", who could be against that? People use it, but no one defines it.
It's like asking someone if they like good food or good movies without making clear whose taste is deciding things.
The only interesting argument I've seen that argued against inheritance asserted that once a person was dead they were no longer able to make any claim on the money, nor was there any person from whom that money could be taken; there's no owner; they simply not exist. Decisions made about property while still alive had no bearing; when you're dead, you're out of the picture. (It seems to avoid the whole issue of "fairness", too.)
What wasn't explained to me was how one goes from that idea to it being OK then for the State to come and just take the wealth left behind.
We've just chosen the default case to be one's surviving relatives, in order of closeness, if a will doesn't specify otherwise.
Perhaps we should just change the default? Or raise the taxes? Making "inheritance illegal" doesn't really have a practical meaning.
Moreover, there would be a limit on how much money you can give to your children while you are alive.
If you are poor, you would be able to get money to give to your children.
This is known as tax. We do this to inheritances already.
>Moreover, there would be a limit on how much money you can give to your children while you are alive.
Very well, I'll buy from my son this fabulous vintage 1976 El Camino for the modest sum of one-meeelion-dollars.
What's unfair about it?
Why should their wealth be determined in part by something they had no control over?
If someone is born with longer-than-average legs, they should be cut short and the excess given to someone born with shorter-than-average legs. That way, they will both have an equally horrible likelihood of becoming basketball superstars.
You need a pretty convincing argument here to change this particular aspect of the status quo.
Granted people are not born equal to begin with, but adding more unfairness to life isn't a good idea.
> What exactly is the rationale behind such an unfair concept?
What's the difference (in real terms) between giving a gift before you die and giving a gift after you die?
> ...limits how much money parents can give to their children
Why are you singling out parents giving money to their children? If we want the freedom to give gifts to whoever we please, we also must accept that most people will want to give gifts to their children.
There is also the obvious evolutionary benefit if you consider the "selfish gene" (Dawkins).
If I earn money (or any asset really) and then gift it to someone does it matter if I died between me earning it and them being given it?
Yes.
I'm sure you'll see the fat end of that wedge. How about if instead of chocolate it is €1 to buy chocolate? OK? What about €10. €1000 but he buys a car that he can use to go to work in? €250,000 but he buys a house for orphans? ...
Question 2: Do you like the ideas of the family farm and family small business?
Question 3: What about life insurance for families?
And yes, I think inheritance in programming should be illegal.
1) The point of gathering wealth is to somehow make yourself happier. Without this, wealth is meaningless. One of the things that make many parents happy is the knowledge that their kids will be well off. If you take that away, you are removing one method of achieving happiness through wealth.
Now, as a society, we do eliminate methods of gaining happiness through wealth. E.g. we don't allow you (legally anyway) to use your money to hire an assassin. There are other, less glamorous limits as well, such as limits on what you can buy in the stock market, etc... Each of these limits has a reason (or should anyway, if it doesn't, we should get rid of the limit) that relates to harming society. You seem to be saying that the money could be better used in other ways by the government. Although I question if the current incarnation of government would do so (in any country) I'll grant the premise for now, but still disagree.
I disagree because not only is making one's kids well off one way to gain happiness through wealth, it is a hugely significant way for many parents. If you want to change the inheritance laws, society needs to weaken the connection between parents and children, something which I don't believe would be a good thing.
2) You seem to think of inheritance as money. Its not just money. Inheritance is also property and rights (and other things? I'm not sure). With your system, after a few generations the government would own everything. Sure, we could find a way to have the government disperse these properties and rights, but this would be a very cumbersome system that would need to be frequently implemented and its unlikely to produce fair results. For example, lets say we do an auction when each person dies. How would people place bids? How can we make sure everyone is allowed to place bids? How can we make sure the rich don't use this to pick up things at way under market/reasonable value because they happen to be awake during the bidding process? Etc... You can probably create a system that solves the questions I asked, but it would be cumbersome and difficult to manage.
The problem is even worse with rights. Lets say I own some long term debt... i.e. I have the legal right to receive cash from a someone periodically over the next 20 (say) years. Now, if I die... who gets the rights to that cash? You want to auction that off as well? Who even knows I have that right? I may have it written down, but it may just be an informal contract with someone. This can be a problem even now, but with wills, people will want to write it down for the sake of their children.
3) In reality, I don't accept your premise that a governing body would do a better job with the inheritance. We see now that so many government programs are a waste (even though many are a success. I'm not being anti-government here). Do we really want to trust some body to use this money? This leaves so much room for error. Also, there are individual/family needs that won't be taken into account. The sick significant other is a big one (mentioned by @russell) and I'm sure there are more.
4) Think of how weird the situation is. Say you save up for your kid to go to private school or college. If you stay alive during that period your kid gets through it without debt. But, if someone hits you with a car, suddenly your kid will need to get loans? That doesn't make any sense. To reconcile this, either you need to do what you said and limit what kids can get while the parents are alive, or allow inheritance.
Lets say we go with option 1 (limiting what kids can get while alive) and say the private school is a religious school. Now, the parents are sending their kids there because they want to instill certain values. So now, we are limiting the parents rights to instill these values? This is not something that should happen in a free society.
Just some thoughts...
EDIT: I am absolutely certain I could not time the cash flows to expire at the exact moment I expire.
Surely, a parent who can do whatever he chooses with his wealth while he is alive can be free to choose where it goes upon his demise. As well, a child who has nothing to do with the reasons for receiving the money other than being born to a man of wealth should not be considered to be making an unfair decision.
So I ask you, who (or what part) is unfair in inheritance?
P.S. In response to your question, you can't have that because that's inherently not capitalism. It's not any individuals responsibility to take care of those around them; their taxes paid throughout life go to a government whose goal is (hopefully) to take care of its citizens. Denying a man's right to pass on his wealth as inheritance is essentially a 100% tax upon death. What's the point of that wealth in the first place then? If he made it, it's his. He can do what he wants with it.
The latter. In fact, it's also unfair for some children to receive more money than others while their parents are alive, so there would need to be limits there.
If you have no say in what an individual does with his wealth while he is alive, why do you think you are entitled (through voting presumably) to have a say in where that money goes when he dies?
Also, it seems like you even want to go so far as to regulate what a parent does with his money when he is alive?? How about this: What if a parent decides to give every single dime of his wealth to a second rich person to further that person's business? Do you think the government should step in and say no, even if it's classed as an investment?
All you seem to be saying is that it's unfair because you don't have rich parents leaving you a bunch of cash. Am I right?