Though I'm attracted to the idea, inheritance tax was always a concept that I see (probably due to ignorance) as extremely vulnerable to "an extra layer of indirection". You see, I'm not actually transferring the company to my son, I'm transferring it to a trust in Switzerland that is controlled by my daughter-in-law.
Well, true, somebody that wants to game the system will find a way.
However, you could still say that everything up to 20 Million* has a lower tax on it and you can give that to your kids in legal ways. I think Warren Buffett and Bill Gates want to give most of their wealth away with a similar reasoning anyways.
That amount of money is still enough to buy a Ferrari and never work again while taking loads of drugs in Monaco every day.
The extra layer of indirection might be enough to guide people in the right direction. I am not sure many people would bet their fortune on their son/daughter in law being good to their kids indefinitely. That would probably provoke some very annoying lawsuits between your kids and their spouses sooner or later.
*= With some correction for inflation over the years, but lets say 20 Million of todays Dollars for example.
That's certainly a possibility, and it certainly is done by the wealthy all the time. At least in the US it is very difficult to transfer large sums of money out of the country without accounting for it, so these end-arounds of taxation are quite difficult to pull off.
Inheritance taxes are better because they force the rich out of a hording mentality - either leave your family with sustaining businesses, which help the middle class by providing jobs, or lose half and have that reallocated. Right now, without an inheritance tax, there's no appeal to take risks on building anything. Just invest at moderate returns and the family fortune will never run out (except in extreme circumstances).
