Researchon Poverty .discussion Papers

The joint distribution of estates of husbands and wives is analyzed to determine the wealth of couples, the process by which wealth is transferred outside the marital unit, ,and the extent of transfers to children. The data are obtained from a representative sample of Hisconsin taxpayers who died in the period 1948 ...78. The data available for these persons includes tax return data, on earnings and probate data related to the estate. The combination of these data permits analysis of the propensity to bequeath i Additional material collected froin Cleveland probates documents the fact that most couples divide their wealth equally among their children. This finding undermines the assertion by Kotlikoff and Spivak that wealth transfers are contracts for support, not motivated by altruism, or an accidental phenomenon associated witp uncertain life span. The paper finds a surprising stability in the proportion of household wealt,h that is bequeathed to children across estates of widely different magnitudes. It also finds that most wealth reaches children through a roundabout process in which wealth is first transferred to the spouse and is then passed to the children. Contrary to lifecycle theories, wealth is not dissaved by older persons and, on average, interspousal bequests are not consumed. .. Modeling Household Bequests L INTRODUCTION.,..-DEFINITIONS AND ISSUES· The transfer of assets from the d~ad to the living excites· curiosity and speculation. The process invites. research because it is one of the rare opportunities that economists have to observe the net wealth of individuals, and observations of that wealth provide a basis for inferring wealth distribution. Economists would also like to draw inferences about lifetime saving and the intergenerational transmission of inet wealth from the transf.ers at death. The profession is closer to such inferences because we have collected data from probated estates of a random sample of Wisconsin taxpayers and are able to distribute the value of. the estate to several types of beneficiaries. The interpretation of estate wealth and its relation to income earned during the lifetime of the decedent pose issues that have not been carefully addressed by the profession. In this paper we attempt to make a beginning by presenting data on pairs of estates--the husbands and the wives of couples who married only·once during their lifetimes. It appears necessary to consider the joint distribution of estates by husbands and wives because the motives for transferring wealth differ between the predeceasing spouse and the surviving spouse. The former has a desire to prOVide the spouse with co~tinuing consumption; both may have motives to endow persons outside .. the household witlt wealth, particularly their own children. This appears