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 fund babies "--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
in America, 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 reports six 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. Indirect evidence,
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 wealth transfers 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, contrary to 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, the inequality 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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