Inter Vivos Transfers and Intended Bequests

50 Pages Posted: 15 Sep 2000

See all articles by Kathleen M. McGarry

Kathleen M. McGarry

University of California, Los Angeles (UCLA) - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: December 1997

Abstract

Empirical work on intergenerational transfers has focused on distinguishing between altruistic and exchange motivated behavior. However, these two models are unable to explain the strong tendency for estates to be divided equally across children, while inter vivos transfers are made unequally. This paper presents a new framework for analyzing transfers from parents to children that is more consistent with observed behavior than are the altruistic and exchange models alone. In particular the model developed here allows for differing behavior with respect to inter vivos transfers and bequests due to uncertainty about the recipient's permanent income. The empirical work uses data from the Health and Retirement Survey and the Asset and Health Dynamics Survey. The patterns observed in these data are consistent with earlier findings that inter vivos transfers go disproportionately to less well-off children, while bequests are divided equally across children. Further, the results support the prediction of the model in that differences in inter vivos transfers arise from differences in current income, while bequests are unequal when the children's permanent incomes are different.

Suggested Citation

McGarry, Kathleen M., Inter Vivos Transfers and Intended Bequests (December 1997). NBER Working Paper No. w6345. Available at SSRN: https://ssrn.com/abstract=226096

Kathleen M. McGarry (Contact Author)

University of California, Los Angeles (UCLA) - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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