Impact of Death Duties on Wealth Management

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You will be taxed in your death
death taxWealth management has joined the ranks of issues that dominate the politics of family values. One of the more dramatic moot points between the Conservative and Liberal parties in the United Kingdom is the issue of death duties. Conservative sees this as an immoral tax that fails to respect the innovation of those who wish to leave their life’s work to their descendants.

For the conservatives no one should be punished for wealth creation because it is their birthright and their moral duty to develop the family assets. They see a sort of class envy as the driving force behind liberal resistance to any reform of the death duties regime.

For the liberals wealth management is a trick of birth. While they may tolerate rich people in life, they find it difficult to let them pass on that wealth to their children. As far as the pure liberal thought is concerned, any results of wealth management are due to the suppression of someone else in the economy. There is a mantra that is well known in the political Left which concludes that in order to be rich you have to make someone else poor. Therefore the beneficiaries of wealth management practice have to be forced to share their gains with the rest of the community.

The compromise of political dogma
These two positions are rather extreme and you will find that most political groupings will fall somewhere in between. However they do reflect the polarizing issue of wealth management when it comes to the state policy on families. Unfortunately for the super rich, the death duties have very little impact on the ordinary person.

The thresholds have been suitably raised in order to ensure that the policy does not alienate a significant portion of the voting public. The super rich are an exclusive club and modern democracy means that they really have to go with the voting decisions of the majority. The majority happen to be poor so it seems that death duties are with us for a long time.

wealth distributionWe then move on to the question of the impact of this after life tax on the wealth management initiatives that have grown over the past few decades. Will rich people stop working hard in order to avoid the death duties? Will they emigrate to tax havens? Will the economies collapse when the wealth management spirit is crushed? All these questions are up in the air and the politicians are grappling with the task of finding suitable answers to them. I have a well founded suspicion that wealth management is a reality and will not go away despite the best efforts of the political factions.

What is happening is a testament to the innovative spirit of rich people. They have come up with quite interesting ways of dealing with the hated death duty regime. One of the more innovative tricks is to distribute the estate before they die. This means that the wealth management units are too small to come within the grasp of the legislative regime. I am sure the government is likewise spending its time coming up with new ways of trapping these new innovative schemes.