The Division of Parental Financial Assets Among Adult Children
Working paper number:98-05
Paper Abstract:Economic estimates of intergeneration transfers in 1986 total nearly $140 billion. Given the magnitude and prevalence of these wealth flows, researchers are trying to better understand the underlying factors that induce transfers from parents to their children. In this study, we examine financial transfers from parents to their adult children using the Asset and Health Dynamics Among the Oldest Old Survey. Previous research on financial transfers have focused separately on cash transfers or bequests. This research is the first to combine these two types of transfers as well as deeds to property, life insurance policies, and trust funds to determine if a child’s income influences the distribution of parental assets. We examine the pattern of transfers both within and across families using two different estimation techniques. The findings both support and extend the previous literature on transfers. Parents appear to target inter vivos transfers of cash to the relatively poorer children in a family, while transfers made at death tend to be made to all children without regard for income differences among children. Together, the results imply that parental asset transfers reduce income inequality among siblings.