“Parents distribute wealth within families for different reasons: gifts often redistribute toward less wealthy children, while inheritances are typically divided equally regardless of differences”

 

What is the focus of the paper?

This paper examines why parents transfer wealth to their children through gifts and inheritances, and how these transfers are allocated within families. It uses administrative data covering the entire Dutch population from 2007–2021, combining tax records with detailed demographic and socioeconomic information. The analysis focuses on three motives: exchange (transfers in return for care), altruism (directing more resources to less advantaged children), and warm glow (equal giving driven by intrinsic motivation). By exploiting differences between siblings, the study isolates within-family allocation patterns. The topic is relevant because private transfers interact with public systems such as pensions and long-term care, shaping redistribution and inequality.

 

What are the key findings?

Inheritances in the Netherlands are typically divided almost equally among siblings, largely independent of their financial situation or personal characteristics. This points to strong social norms and a dominant warm-glow motive. There is little evidence that income, proximity, or caregiving affects inheritance allocation. Gifts show a different pattern: within families, financially weaker children are more likely to receive transfers and receive relatively more. This indicates a clear altruistic motive and active redistribution. For both gifts and inheritances, there is no convincing evidence that transfers compensate children for informal care.

 

What are the implications?

  • Gifts can reduce inequality within families, whereas inheritances contribute less due to equal division.
  • Pension funds and policymakers must take into account the fact that households deliberately set aside assets for intergenerational transfers, which influences consumption and retirement decisions.
  • Tax incentives for gifts can affect timing and distribution of transfers, while inheritances appear less sensitive to taxation.
  • The absence of an exchange motive suggests limited effectiveness of tax incentives tied to informal caregiving.