The Division of Bequests

Michael Hurd, RAND
James P. Smith, RAND

We document the pattern of bequests based on the exit interviews in AHEAD waves 2-4. We find how bequest inequality varies with the number of children, the age of the decedent, the size of the bequest and so forth. We study the determinants of the propensity to bequeath unequally, and, given that the bequest is unequal, the determinants of the division of the estate. Altruistic theory suggests that when children have very unequal economic resources estates will tend to be unequally divided. Reciprocity suggests that when there were prior unequal upward transfers of time or money estates will be unequally divided. By combining the core HRS data with the exit interview data we are able to conduct a direct test of these theories. We find how bequests affect wealth inequality by finding their affect on the wealth of the recipients.