Net Accumulation to the Estate: Meaning and Measurement

In addition to loss of support, wrongful death actions in many states require the estimation of lost net accumulation to the estate or loss of inheritance as a separate element of damages. Conceptually, net estate accumulations are simply a loss of the difference between the value of the estate in the future, had the tort not occurred, compared to the value of the estate at the actual time of death. This approach allows for recovery claims by individuals who were not directly supported by the deceased, including adult children. As a result, these types of actions are sometimes referred to as “survivorship cases” as opposed to “wrongful death cases.” It has been the authors’ experience that in these types of cases, numerous conceptual errors are made in terms of what is meant by net estate accumulation and, most important to the forensic economist, how it is measured. The purpose of this paper is to help clarify the issues surrounding the concept of net estate accumulation and to provide insights regarding the correct calculation of these losses. The paper is organized as follows. Section II focuses on the legal parameters imposed by the courts and the specific guidelines concerning how the economist distinguishes between lost net accumulation to the estate and loss of support. A review of the economics literature is provided in Sections III and IV. In the forensic economics literature, there are few articles written regarding the measurement of lost net accumulation to the estate. On the other hand, there is a significant literature outside of forensic economics that investigates the question of whether Americans adequately save for retirement and the extent to which money is available at the time of death for estate purposes. If, in fact, most Americans do not save enough for retirement, then it is reasonable to conclude that there will be very little passed on through the estate except perhaps for the very wealthy. Section V addresses some common mistakes made by economists when calculating lost net accumulation to the estate. Based upon discussion in this section and review of the literature, an extended example is presented in Section VI. Using simplified assumptions, we indicate the circumstances under which lost net accumulation to the estate estimates are worthwhile. The example can be manipulated to demonstrate how changes in various parameters such as age