[rwrcpa1]

All of the choices you mention (except invest) are TAX FREE (and even tax deductions) under the current tax system for most inherited wealth.

Not true. You pay college tuition with post tax dollars (except for tuition deduction which is miniscule). You can give money away tax free under the fair tax. Not so under current tax law, except for limited amounts each year.

Even investment is tax deferred and when taxed, is taxed at one half of the proposed Consumption tax.

Not so. Most individual's investments are in tax deferred retirement accounts. This money is taxed as ordinary income when it is pulled out under current tax law.

[Your Nightmare]

You can give money away tax free under the fair tax. Not so under current tax law, except for limited amounts each year.

But what happens with the receiver purchases things with the gift? It's taxed.

You really need to understand real values. Today, if I get a $10,000 gift and pay no income taxes on it, I can buy $10,000 worth of stuff. It's real value is $10,000. With the FairTax, if I get a $10,000 gift, I can only buy $7,700 worth of stuff. It's real value is $7,700.

Today, if I get a $100,000 gift and pay a 23% income tax, it's no different than getting $100,000 and and paying 23% of it when I spend it. The real values are the same.

Not so. Most individual's investments are in tax deferred retirement accounts. This money is taxed as ordinary income when it is pulled out under current tax law.

But retired people under the income tax are taxed at a much lower rate than they would be under the FairTax. In 2002, the median effective tax rate on the elderly for the taxes the FairTax replace was 5.4%. That's significantly less than the 23% FairTax rate.

In real values, $1,000 investment income under an effective 5.4% tax rate has a real value of $946. Under the FairTax it has an effective rate of $770.