How Large Are Bequest Motives? Estimates Based on Health Shocks

Abstract

I analyze the inter vivo transfers and bequest decisions of 700,000 individuals during a period when the decision maker receives negative news regarding their life expectancy. The event that initiates the news is a health outcome. Expected mortality increases both the likelihood of transferring wealth to the next generation and the amount transferred. The size of the inter vivo transfer and bequest are positively related to the wealth of the parent and the severity of the diagnosis, regardless of diagnosis-specific demand for informal care. Using a structural life cycle model, I estimate the bequest parameters that are consistent with the causal effect estimates.