Death and Taxes: Inheritance Tax Planning and Unexpected Mortality"  with Jeanne Bomare and Ignacio Orueta

We use unexpected deaths during the first wave of the COVID-19 pandemic as a natural experiment to measure the extent of inheritance tax planning in the United Kingdom. Because tax-planning strategies require time and foresight, the pandemic created an exogenous shock that limited opportunities to plan before death. Using administrative inheritance tax returns linked to mortality data, we compare estates of decedents who died unexpectedly during the pandemic with those who died in preceding years. We find that estates associated with unexpected deaths are significantly larger and face higher tax liabilities, indicating that prior planning substantially reduces reported wealth at death. Our evidence suggests that inter-vivos transfers, rather than estate restructuring, are the primary mechanism of tax planning. We estimate that inheritance tax planning reduces effective tax liabilities by approximately 50 percent, corresponding to £3-4.5 billion in forgone annual revenue. These findings highlight the importance of anticipatory wealth transfers in shaping inheritance-tax outcomes and carry implications for the design of wealth tax policy.