Racial disparities in bequests lead to a widening wealth gap
Alicia H. Munnell is a Senior Advisor to the Center for Retirement Research at Boston College which she founded and directed in 1988; she served as CRR Director until yearend 2024.
Recent research has begun to evaluate how wills affect wealth transfers from one generation to the next. Our recent study using data from the US Health and Retirement Study (HRS) explored whether receiving an inheritance increases the likelihood of having a will and planning to leave a bequest, and also the extent to which having a will helps one realize a bequest intention.
Having a will is really important, since without one, the decedent’s assets are split up according to state intestacy law. These rules can work well for traditional families, but they can result in the wrong outcome when the intended beneficiaries are not related to the decedent. Moreover, dying without a will is particularly problematic when the estate is modest and the largest asset is the home, where multiple heirs are often unable to coordinate on maintaining or selling the property – which can end up diminishing the home’s value.
Despite the importance of wills, only about two-thirds of US households ages 70+ have one, and that share has been declining over time (see Figure 1).
Figure 1. Percentage of Households Ages 70+ in which the Head Has a Will, 1996-2018
Source: Jean-Pierre Aubry, Alicia H. Munnell, and Gal Wettstein. (2023). “Wills, Wealth, and Race.” https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4590303
Additionally, the shares of Black and Hispanic families with wills are substantially lower (see Figure 2).
Figure 2. Percentage of Households Ages 70+ in which the Head Has a Will, 2018
Source: Aubry, Munnell, and Wettstein (2023).
In this regard, our first question was why non-White respondents are significantly less likely to have a will. Our empirical analysis showed that having a will is related to receiving an inheritance, and non-White households were significantly less likely to receive an inheritance, even accounting for education, age, and marital status (see Figure 3).
Figure 3. Relationship of Various Characteristics to Probability of Receiving an Inheritance, 1992-2018
Note: Solid bars are statistically significant.
Source: Aubry, Munnell, and Wettstein (2023).
We next asked what factors determine whether an individual planned to leave a bequest. Receiving an inheritance raises the likelihood of leaving bequests of all amounts, and non-White respondents reported lower expectations of leaving a bequest. This flips, however, for bequests amounting to at least $500,000, possibly because successful non-Whites feel a strong obligation to ensure that assets go to their families.
Our next question was whether peoples’ intentions to leave a bequest were, in fact, realized. We can examine this issue since the HRS includes “exit interviews” for people who have died. Naturally the subgroup of decedents differs from the full sample, as survivors are less likely to be Black, more likely to have a will, and be older. Therefore, the estimated impact of wills is likely to be a lower bound.
What we found was that people’s chances of failing to leave an estate of at least $10,000, $100,000, and $500,000, respectively, varied, even when they had indicated that they expected to leave such an estate. In particular, Black and Hispanic decedents were less likely to meet their targets, and all results were statistically significant except for the lowest target amount for Blacks (see Figure 4). Strikingly, though, across race and ethnicity, those with wills were less likely to fall short of their expected bequests at each target amount.
Figure 4. Relationship of Race/Ethnicity and Having a Will to Probability of Failing to Leave a Bequest of at Least $10K, $100K, and $500K, 1992-2018
Note: Solid bars are statistically significant.
Source: Aubry, Munnell, and Wettstein (2023).
This indicates that the racial gap in bequests is important, even for those anticipating leaving a bequest: that is, Black and Hispanic decedents fail to meet their targets more often. This finding is concerning given that Black and Hispanic respondents have much lower expectations of leaving substantial bequests and are less likely to have a will. The good news is that having a will seems to mitigate such failures.
Views of our Guest Bloggers are theirs alone, and not of the Pension Research Council, the Wharton School, or the University of Pennsylvania.
