Post-Retirement Discounting in Estate Loss Calculations and the Net Discount Rate

Fred Abraham and David R. Hakes
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Fred Abraham: University of Northern Iowa
David R. Hakes: University of Northern Iowa

Journal of Economic Insight, 2017, vol. 43, issue 1, 69-77

Abstract: We show that the accumulations to an estate from premature death should be discounted from the time of projected death rather than from retirement. We provide evidence that in most cases an estate does not grow, and is most likely stable, from the time of retirement to that of projected death. We then calculate the overstatement of the loss to the estate when a forensic economist mistakenly discounts the accumulations to the estate from the time of retirement instead of projected death. We also demonstrate that the use of a net discount rate to discount from retirement to projected death overstates the loss to the estate because a net discount rate implicitly assumes a positive growth rate in the nominal estate from retirement to projected death.

JEL-codes: E43 J26 K13 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:mve:journl:v:43:y:2017:i:1:p:69-77

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