Inheriting Wealth in America: Future Boom or Bust?

Hardcover | March 9, 2015

byEdward N. Wolff

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Inheritances are often regarded as a societal "evil," enabling great fortunes to be passed from one generation to another, thus exacerbating wealth inequality and reducing wealth mobility. Discussions of inheritances in America bring to mind the Vanderbilts, Rockefellers, and "trust fundbabies" - people who receive enough money through inheritances or gifts that they do not have any need to work during their lifetime. Though these are, of course, extreme outliers, inheritances in America have a reputation for being a way the rich keep getting richer. In Inheriting Wealth inAmerica, Edward Wolff seeks to counter these misconceptions with data and arguments that illuminate who inherits what in the United States and what results from these wealth transfers.Using data from the Survey of Consumer Finances - a triennial survey conducted by the Federal Reserve Board that contains detailed information on household wealth, inheritances, and gifts - as well as the Panel Study of Income Dynamics and a simulation model over years 1989 to 2010, Wolff reportssix major findings on the state of inheritances in America. First, wealth transfers (inheritances and gifts) accounted for less than one quarter of household wealth. However, for persons age 75 and over, the figure was about two-fifths since they have more time to receive wealth transfers. Indirectevidence, derived from the simulation model, indicates a figure closer to two-thirds at end of life - probably the best estimate. Second, despite prognostications of a coming "inheritance boom," it has not materialized yet. Only a small (and statistically insignificant) uptick in average wealthtransfers was observed over the period, and wealth transfers were actually down as a share of household wealth. Third, while wealth transfers are greater in dollar amount for richer households than poorer ones, they constitute a smaller share of the accumulated wealth of the rich. Fourth, contraryto popular belief, inheritances and gifts, on net, reduce wealth inequality rather than raising it. The rationale is that inheritances and particularly gifts typically flow from richer to poorer persons, thus lowering wealth inequality. Fifth, despite a rapid rise in income inequality, theinequality of wealth transfers shows no discernible time trend from 1989 to 2010, neither upward nor downward. Sixth, among the very wealthy, the share of wealth accounted for by wealth transfers is surprisingly low, only about a sixth, and this share has trended significantly downward over time. It is true that inheritances and gifts are unequal, with only one fifth of families receiving wealth transfers and these transfers benefitting the rich far more than the middle class and the poor. That, however, is not the whole picture of inheritances in America. Clearly-written and illuminating,this books expertly distills an abundance of data on inheritances into important takeaways for all who wonder about the current state of inheritances and gifts in the United States.

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Inheritances are often regarded as a societal "evil," enabling great fortunes to be passed from one generation to another, thus exacerbating wealth inequality and reducing wealth mobility. Discussions of inheritances in America bring to mind the Vanderbilts, Rockefellers, and "trust fundbabies" - people who receive enough money through...

Edward Wolff received his doctorate from Yale University in 1974. He is currently professor of economics at New York University and a Research Associate at the National Bureau of Economic Research. He served as Managing Editor of the Review of Income and Wealth (1987-2004) and was a Senior Scholar at the Levy Economics Institute of Ba...

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Format:HardcoverDimensions:272 pages, 9.21 × 6.3 × 0.91 inPublished:March 9, 2015Publisher:Oxford University PressLanguage:English

The following ISBNs are associated with this title:

ISBN - 10:0199353956

ISBN - 13:9780199353958

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Table of Contents

1. Introduction to the Book1.1 Prologue1.2 Overview and plan of the book2. Background Material2.1 Literature review on inheritances2.2 Household Wealth Trends, 1983 to 20103. Inheritances and the Distribution of Wealth Or Whatever Happened to the Great Inheritance Boom?3.1. Introduction3.2. Data sources and methods3.3 Empirical findings, 1989 - 20073.4 Summary and concluding remarksAppendix to Chapter 3: Questions on Wealth Transfers and Work History in the Survey of Consumer Finances Questionnaire4. An Examination of Inheritances Using the Panel Survey of Income Dynamics4.1 Introduction4.2 Patterns of inheritances4.3 Do inheritances substitute for other savings?4.4 Concluding remarks5. Wealth Accumulation by Age Cohort: The Role of Savings, Capital Gains and Intergenerational Transfers5.1 Introduction5.2 The accounting framework5.3 Data sources and descriptive statistics5.4 Simulation model of wealth changes by age group5.5 Simulation results5.6 Concluding remarksAppendix to Chapter 5: Sources and Methods Used in the Construction of Savings Rates by Age Group, 1983 to 20076. Conclusions and Policy Recommendations6.1 Summary and concluding remarks6.2 Policy recommendations