Inheritance
Chris, Nick and Fraser discuss the inheritance and ownership.
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Transcript
Hello and welcome to the Cognitive Engineering podcast produced by Tell Me Studios for Aleph Insights. In this series of podcasts we take a look at interesting topics and discuss what we think they tell us about analysis and decision making. I'm Fraser McGruer and I'm here with Chris Wragg and Nick Hare of Aleph Insights and this week we're discussing inheritance. So let's kick off with yourself Chris. Are you about to inherit a load of stuff?
Speaker B:Well I don't know is the answer but we got contacted, I don't know, about six months or so ago by an Austrian solicitor. I have sort of distant relatives who lived in, who are from Austria and my dad's half-cousin died intestate and they have very, well they have very different inheritance rules to us in Austria where they are obliged to bequeath their estate in a particular order. So they couldn't write relatives out of a will for example, they have to follow a set pattern to a certain extent and if they don't trace anyone it all goes to the state but the state pays for it to be traced. So I got, my mother in fact, got contacted about the death of this pretty distant random relative. Is he something like the the 17th Duke of Arkenberg? Well no, no it's, it was a old lady who lived in Linz but you know so we have, first of all they try and trace the who's actually in line to have this thing and she, you know, she was without siblings and without children and so it turns out that we're in with a shout to be the closest relatives but we have no idea what the value of this state is and in fact the Austrian system involves at some point you get some sort of indication but you have to make a call on whether or not to accept this inheritance which could be a liability. So there's also that to be considered. So it just got me thinking about, you know, the nature of inheritance, what's it all about really, you know, I mean we most often think of it in terms of parents to children but this just got me questioning it from another angle. Why do we have inheritance? What are the implications of
Speaker C:inheritance for society? And why it's different, I mean why it's treated legally as a whole thing on its own? Why it isn't just considered to be, you know, giving presents to people?
Speaker B:Yeah that's right and I think the kind of conclusion I started to think about in my mind is that actually, you know, as I think, as I have children now and as I think more about, you know, preparing them and making sure they're okay and setting them up, you know, this notion that actually as you get towards the final parts of, you know, as you get to the second half of your life you start contemplating not your own material and societal position but the incentive for doing things is actually about, you know, your children and grandchildren. So, you know, why do you need to increase your wealth from this position to that position? It's not going to do you that much good once you reach a certain stage. It's actually sort of, you know, trying to give them an advantage.
Speaker C:So I think there's a, it's kind of puzzling the way that we think about inheritance because there's a lot of outrage about the idea of inheritance tax which is really puzzling when you think about it because, I mean, inheritance tax is tax on something you haven't earned. It's tax on something that isn't yours. Now we might think, well, parents ought to be able to just give what they want to their kids but, you know, why shouldn't, well, the question is why shouldn't that just be taxed whereas, you know, when it comes to income which is our own, the sweat of our own brows, we don't, and I did it in income tax, you know, we don't seem, doesn't seem to bother us but that's ours. What's actually ours and is taxed doesn't bother us at all but what isn't ours and gets taxed for some reason people get very outraged about. You know, the idea of having to sell, in inverted commas, the family home, you know, to pay for the inheritance tax seems to a lot of people to be wrong but, I mean, you know, actually why is that any different to, you know, not being able to afford a house in the first place because you paid income tax, you know.
Speaker B:I mean, I think at the heart of it is, you know, this sort of thinking about what inheritance is and, you know, the fact that inheritance tax is a tax on the donor not the donee or the, you know, the recipient of the inheritance. So it's, that's, you know, why people talk about it as being a death tax, you know, a tax on a dying person. Well, it's a tax on the estate, isn't it?
Speaker C:I mean, it isn't, it is a tax on the recipient in the sense that, you know, it's sort of treated like their income, you know, if you, but I think it's a tax on the estate, isn't it? I mean, it's not like that person who's just died is going to be particularly important. No, that's right.
Speaker A:But also it's a question of, well, why should it go to the state though? Why should, you know?
Speaker C:Yeah, but look, if I give you a million pounds, you're going to be taxed on it like it's income. It shouldn't really be any different.
Speaker B:I think there's also this idea of, you know, you want to advantage your children as much as possible but obviously over generations, you know, that's how you get an enshrined aristocracy, for example, because of the, you know, the propagation of wealth over generations and inheritance tax is obviously one way of resetting things. It reminds me a bit of the lottery of Babylon, you know, and this idea that actually there is a huge amount of chance to what you inherit both in terms of actual material wealth but also those intangibles like, you know, social capital and your education and your position and the wisdom your parents have given you and so on and so forth. Those are all things that you affect. And their looks. And their looks, yes, quite.
Speaker C:You know, parents hand on.
Speaker A:Well, what about, Nick, sort of continuing on from what you said, let's say you've got a marvellous record collection, a great vinyl collection and you want to pass that on to the children, to your children. Why, you know, I think wouldn't it be a good idea if the state could have a little bit of that as well and just take some of your records?
Speaker C:Well, they do effectively, don't they? Because the estate is valued and so you're paying a portion of that value. So, I mean, yes, it is more or less what happens.
Speaker A:No, but let's say that we actually, you know, 10% of the actual records physically get sent off to the government. How about that? But it's the equivalent, isn't it?
Speaker C:I mean, is the equivalent? I don't know what you're talking about.
Speaker A:Well, I'm expecting you to, I don't think it is the equivalent because let's say, you know, I'm no doubt you, let's say you've got a great taste in music.
Speaker C:Let's say those records got confiscated by the government and you, you know, you bought them back at their value, which you could do. That's the exact same as just taxing someone for the money.
Speaker A:But let's say, what about if you couldn't buy them back? But why would that be the, I don't know. It doesn't matter why not. But I mean, 90%, your children get to have 90% of your records, but 10% of them they don't and they can't buy them back. How do you feel about that? Does that seem okay?
Speaker C:I think the assumption that they can't buy them back is the difficult bit here because that's the, that's, I mean, the only circumstance under which confiscating the goods or confiscating a portion of the value of the goods aren't equivalent is if those things are literally irreplaceable. Okay, so what we're saying is, would I like it if something that was irreplaceable was confiscated by the government? No, I don't think I would.
Speaker B:But I think that question does sort of get to the heart of the emotional nature of inheritance and why people get so irate about this notion of you're preventing me from passing. Now, obviously, you know, £10 is £10 and you can't really attach much emotional value to that. But for some reason, when it comes to bequeathing an estate, people feel that is a sort of their fundamental right.
Speaker C:Yeah, particularly the house, I think, you know, that's the trick. It's when people, you know, have to sell the house to pay for the death duty. Well, you know, I mean, is the problem that we overvalue houses, you know, that we tend to sort of think of them as more important than they actually are? I mean, I don't see why, what sense, you know, people have a right to own their parents' house.
Speaker B:I suppose one of the great sort of perceived inequities of inheritance tax is that, say, for example, you are middling in terms of your sort of wealth, you probably have most of your capital tied up in a house, which makes it very difficult to avoid inheritance tax. If you are richer, you are able to put it in assets that it is easier, you know, certain things are not susceptible to income, inheritance tax and can be avoided. So I think that's, you know, that's one of the things that people sort of gripe at. But those are all implementation issues, really, you know, I mean, you know, not a huge amount of income is generated for the government from income tax. So it's less than 1%. Income tax or inheritance? Sorry, inheritance tax. Yes, you know, and in most, that's the case in most sort of developed economies, that it's a fairly small fraction. And, you know, the argument's been made that, well, why would we, you know, why would we do this when it's generating a small amount of money? And I think the counter argument is it's one way of redistributing wealth and ensuring a sort of equitable beginning to people's lives and, you know, smoothing out privilege effectively.
Speaker A:But let's move this in a slightly different direction. If we forget about the financial side of things for a moment, what would you like to bequeath to your children or to your next of kin?
Speaker C:My stuff. I think there's an interesting... So amongst your stuff, what do you hold dear? Oh, I don't know, the piano house, some books.
Speaker B:I think increasingly... Some photos. You know, things that will be of interest, you know, so take a record collection, a record collection may now not be owned by an individual in that they would have, you know, they would have a playlist that's owned by, you know, one of the companies that do live music streaming and so that ability to pass on things, we may, you know, because everything is delivered, you know, using the hated phrase as a service, it makes it much more difficult to own things which we've traditionally attached emotional, you know, value to like music collections or book, you know, books being sort of perhaps, you know, owned via a Kindle but not actually, you know, having the rights to those.
Speaker C:Yeah, I think people are sort of just waking up to this, that, you know, we're sort of... people are increasing it because it's very recently that we've had sort of digital media of sizable enough value for this to be a thing. But, you know, people are sort of realizing now that, for example, the games that you bought on Steam are not actually owned by you, you've got a license to use them while you're alive and Steam's terms and conditions clearly state that when you die, you know, you cannot, under any circumstances, transfer your account to someone else. You can't give your Steam games to anyone. Likewise, iTunes has a similar thing with the music that you buy through iTunes. It's not your only rent. You're effectively renting them for the duration of your life. And I think people are so used to the idea of owning a thing, a physical piece of media and being able to give it, being able to give a CD or an LP to someone else. But actually, all this is really is the technology catching up with what the law has always been, which is you don't own the music. You know, when you buy a CD, you own that CD. You own the physical object. You don't own the music. You don't, for example, have the right to make a copy of it and give copies of it to people. And, you know, really all along, the companies have wanted to see for people to see what they're doing is buying the right to listen to a piece of music. They're not buying that music. And the fact that we've been able to hand a CD or an LP to someone else is, you know, is actually almost a bug as far as those, you know, the sort of media companies are concerned. They'd rather that our physical media died with us. But I think this is a sort of, you know, it's interesting. We have to, I think we have to, there's certainly no, there's nothing intrinsic in the concept of ownership that makes digital objects any different, really, to lots of other things that you can own. So you can own, you know, you can own an intellectual property. You can own a copyright. You can pass these things on. I know there's, you know, there are people who kind of own the rights to Happy Birthday, you know, and still make money off it. And these things can be bought and sold. And, you know, there's no reason. I mean, you know, Steam, if they could be bothered to change their terms and conditions and renegotiate with all of their, you know, the software companies, then they could change it so that you could pass those accounts on. We, but, you know, we have to make a decision as a society. The problem with doing that is it then becomes open to exploitation, you know. So it then becomes possible because it's very, very easy for me to make a digital copy or just at the very least to hand over a password. You know, if I want to give you my LP collection, you've got to come with a small van. I mean, in my case, a very small van because I've got like two LPs. But I mean, you get the idea. But if I want to give you my Steam collection, I just have to give you my password. So it's just very, very, very easy to then exploit. You know, if you're able to transfer accounts between people, you know, you could just have 20 people sharing the same account and or me renting my account out to people.
Speaker A:I think just to sort of say that I know the things I'd like to pass on that I probably hold dearest. I've got a lot of audio recordings of myself and my children reading stories to them. And often I record them surreptitiously so I don't affect their behavior. And I treasure those. Actually lost a load of those, which is annoying. But those are the things that I sort of would want them to be able to access in one form or another. Right. Hang on. I just thought who owns these podcasts?
Speaker C:I thought I did. Hang on. It's time to lawyer up chaps.
Speaker B:But I think this idea of digital ownership is really quite interesting when you start talking about when you start thinking about where digital technology might be going and, you know, looking much further ahead and the uploading of facets of people's personalities, for example, you know, so not quite digital immortality. But, you know, you were talking about memories there, handing on memories, you know, and it's not inconceivable that we're in a situation where that's augmented in some way. And there's this element of keeping a person alive in some respect. What does that then mean for inheritance? You know, if there is some shred of a person existing, do they lose ownership of everything?
Speaker A:And unfortunately, we'll have to finish on that question, which I think is an interesting one. So we'll have to stop there. We need to wrap up. So thank you, as always, for listening to the Cognitive Engineering Podcast. I'm Fraser McGruer. We've been here with Nick Hare and Chris Wragg of Aleph Insights. Until next time. Bye-bye.
