Why people leave bequests

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Wojciech Kopczuk , Wojciech Kopczuk. Columbia University. Oxford Academic. Google Scholar. Joseph P. Federal Reserve Board. Select Format Select format. Permissions Icon Permissions.

Email us at HelpMeRetire marketwatch. Alicia H. Home Retirement Estate Planning Retirement. Encore Opinion: Do people plan to leave bequests? Do they have wills? Published: Aug. ET By Alicia H. What should I do? Hidden in plain sight is a U. An altruistic parent experiences a benefit from his or her children's happiness. One way a parent can influence a child's happiness is to give some of his or her wealth to the child. In a survey of older individuals, John Laitner and F.

Thomas Juster found that 45 percent of respondents with children considered leaving an estate or inheritance to be very or quite important. During life, a parent may be reluctant to part with much of his or her wealth because of uncertainty about how long he or she will live and future financial needs.

At death, the parent no longer has these concerns, and his or her wealth can be freely distributed to descendents. To test this theory, researchers first assume that parents feel equally altruistic about all of their children. If this is true, then it would follow that parents distribute bequests in a manner that equalizes their children's after-bequest income and wealth. This theory is tested by examining how bequests are distributed among children to see if poorer children receive larger bequests and wealthier children receive smaller bequests.

The data show that roughly two-thirds of all decedents distribute bequests almost equally to all children. Those who do not distribute bequests equally do indeed show some tendency to give larger bequests to poorer children, but the tendency is not as strong as expected. Exchange-motivated bequests. The failure to confirm intergenerational altruism as a major bequest motive leads researchers to suspect that many bequests are motivated by some form of intergenerational exchange.

Douglas Bernheim, Andrei Shleifer, and Lawrence Summers studied a large number of older people and the types and frequency of contact they had with their children.

They also examined the types of wealth held by survey participants. The types of contact studied were phone calls and visits by the children to their parents. The researchers found that the more bequeathable wealth parents had, the more children contacted their parents. The hypothesis here is that the parents' wealth induces the children to make more frequent contact. Children may even compete for larger shares of the estate.

In families with only one child, the child tended to contact the parents less frequently than did children in larger families.