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Motives for Bequests within the Middle Class

Authors

Abstract

The life-cycle model of household behavior forms the basis for most economic analysis of Social Security, private pensions, and retirement. This project seeks to extend the usefulness of the life-cycle model by considering the role of middle-class inheritances and bequests. We use HRS data. Prior work by the authors identifies key information in the HRS on the sources of private intergenerational transfers, and it shows that the frequency of couples’ inheritances from both spouses’ family lines is higher than random behavior would imply. Using additional HRS data on the ratio of parent-to-child lifetime incomes, we analyze the motives behind HRS bequests. We find support for an unintentional transfer model in which bequests arise from residual, unspent parent life-cycle resources. And, we show that our model can account for the frequency of dual inheritances that earlier work revealed.

Key Findings

  • Using Health and Retirement Study data on the ratio of parent-to-child lifetime incomes, we analyze the motives behind bequests. We find support for an unintentional transfer model in which bequests arise from residual, unspent parent life-cycle resources.
  • We find some evidence of altruistic bequest behavior, but the support seems limited.
  • We show that our model can account for the frequency of dual inheritances that earlier work revealed.

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Project

Paper ID

WP 2012-275

Publication Type

Working Paper

Publication Year

2012