Inheritance and Bequests
The importance of bequests, their role in capital accumulation, and the motivation behind these transfers has long been the subject of debate among economists. Various models of intergenerational transfers yield different predictions about the responsiveness of bequests to changes in incomes of the donors and recipients and thus to the impact public policy. Yet, despite the intuitive appeal of these models, none has proved to be consistent with empirical patterns. This article discusses the alternative theories of transfer behaviour, examines the empirical work testing their predictions, and discusses the role of estate and gift taxes in affecting bequest behaviour.
KeywordsAccidental-bequest motive Altruism Annuities Bequest motive Bequests Charitable contributions Consumption smoothing Estate taxation Exchange motive Gift taxation Health insurance Inheritance taxation Inheritances Inter vivos transfers Intergenerational transfers Life insurance Marginal utility of consumption National Longitudinal Surveys (NLS) Pensions Savings behaviour Social Security (USA) Succession laws Tax avoidance Transfer taxation Wills
- Cooper, G. 1979. Voluntary tax? New perspectives on sophisticated estate tax avoidance. Washington, DC: Brookings Institution Press.Google Scholar
- Hurd, M. 1987. Savings of the elderly and desired bequests. American Economic Review 77: 298–312.Google Scholar
- Johnson, B. and Eller, M. 2001. Federal taxation of inheritance and wealth transfers. Washington, DC: Statistics of Income Division, Internal Revenue Service. Online. Available at http://www.irs.gov/pub/irs-soi/inhwlttr.pdf. Accessed 7 Mar 2006.
- Joulfaian, D. 1998. The federal estate and gift tax: Description, profile of taxpayers, and economic consequences. Office of Tax Analysis Paper 80. Washington, DC: US Department of Treasury.Google Scholar
- Kopczuk, W., and J. Slemrod. 2001. The impact of the estate tax on the wealth accumulation and avoidance behavior of donors. In Rethinking estate and gift taxation, ed. W. Gale, J. Hines, and J. Slemrod. Washington, DC: Brookings Institution Press.Google Scholar
- U.S. Congressional Budget Office. 2004. The estate tax and charitable giving. Washington, DC: Congressional Budget Office.Google Scholar
- Wilhelm, M. 1996. Bequest behavior and the effect of heirs’ earnings: Testing the altrusitic model of bequests. American Economic Review 86: 874–892.Google Scholar