Whether you have worked hard for your wealth, inherited your wealth or are simply envious of the wealth of others, you likely have an opinion regarding whether inherited wealth is a bad or a good thing.
The notion that inherited wealth is bad has made something of a resurgence. In a recently published book titled “Capital in the Twenty-First Century,” French economist Thomas
Piketty argues that estates are getting larger and eventually most of the money in the world will be tied up in huge estates. The argument is that this is bad.
In the view of Piketty the wealthiest people will have done nothing to earn the wealth themselves and much of the money will never be spent. Consequently, the money will just accumulate in their estates and remain outside the greater economy.
Not all economists see this as a necessarily bad thing, however.
A countervailing perspective is offered in a recent article in The New York Times titled “How Inherited Wealth Helps the Economy” by Harvard Professor N. Gregory Mankiw. He explains how those who save their money and leave an estate to their heirs actually induce a redistribution of wealth from the owners of capital to workers. According to Mankiw, “Because capital is subject to diminishing returns, an increase in its supply causes each unit of capital to earn less. And because increased capital raises labor productivity, workers enjoy higher wages.”
Of course, many people for personal or political reasons do not want to leave everything to their families. Fortunately, it is still a free country.
There is not necessarily a right answer. No one should feel guilty about what he or she wants to do with his or her own wealth.
In the end, whether you want to give everything to charity or leave it all to your family, only proper estate planning can make it happen.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri) and to download free tools to help you organize your estate, visit my estate planning website.
Reference: New York Times (June 21, 2014) “How Inherited Wealth Helps the Economy”