Accidental bequests: a curse for the rich and a boon for the poor

When accidental bequests signal otherwise unobservable individual characteristics such as productivity and longevity, the population should be partitioned into two groups: those who do not receive an inheritance those who do. The …rst tagged group gets a second-best tax à la Mirrlees; the second group, when its type is fully revealed, a …rst-best tax schedule. Receiving an inheritance makes high-ability types worse o¤ and low-ability types better o¤. High-ability individuals face a bequest tax of more than 100%, while low-ability types face a bequest tax that can be smaller as well as larger than 100% and may even be negative. JEL classi…cation: H21. Keywords: accidental bequests, estate tax, tagging, …rst best, second best. We thank Tomer Blumkin and Jean-Marie Lozachmeur for helpful remarks. We are particularly grateful to the referees and the editor, Ragnar Torvik, for their detailed and constructive comments. Financial support from the Chaire “Marche des risques et creation de valeur” of the FdR/SCOR is gratefully acknowledged.