How Large Are Bequest Motives? Evidence Based on Shocks to Mortality

Abstract

This paper analyzes the inter-vivos transfers and bequest decisions of about 700,000 individuals during a period when the decision-maker receives negative news about future life expectancy. The event that produces the news is a negative health outcome. In line with models of dynastic utility maximization, increases in expected mortality increase the likelihood of transferring wealth to the next generation along both the intensive and the extensive margins. The size of the inter-vivos transfer and the bequest are positively related to the wealth of the parent and the severity of the diagnosis--irrespective of diagnosis-specific demand for informal care.