Abstract
We derive expressions for optimal consumption for family trusts with random wealth and uncertain survival. Using UK birth statistics and the theory of branching processes, we compute size and survival probabilities for single- and multiple-branch families. Survival for a single-branch family is approximated by a Pareto distribution and consumption policies exhibit decreasing discount rates, but multiple-branch families use non-monotonic discount rates. When trust distributions depend on the number of beneficiaries rather than the survival of the whole family unit, spending paths depend on expected membership and the elasticity of intertemporal substitution. We report examples of consumption paths for a range of family trusts with constant relative risk aversion preferences.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
