The Economics Of Inheritances

October 17, 2016 in Daily Bulletin

Richard Davies wrote about inherited wealth:

  • One study found that parents with more transferrable wealth – such as housing or bonds – received more visits from their children.
  • The best way to get attention from children was to be sick, wealthy, and to have multiple offspring that might be competing for a prime spot on the will.
  • Parents respond to incentives too. In some farming communities it is the youngest that inherits the family’s lands. This ensures that older children leave the home and make something of themselves. But there’s still a strapping young child around to take care of the parents in their old age.
  • Today the wealthy struggle with structuring inheritances so that the next generation can’t blow it on booze and other distractions.
  • One popular method for doing so is an “incentive trust”. This ties inheritances payments to the achievements of certain milestones – like graduating college. Or it might incentivize hard work by agreeing to match a scion’s salary – rather than replace it entirely.

Read more about inter-generational wealth transfers on 1843.