Planned bequests: Decision to have a will and distributive preferences among the very old

Jieun Lee, Purdue University

Abstract

The main purpose of this study is to investigate older people's planning for estate distribution and their distributive preferences by examining the factors associated with their will-holding status and the inclusion of specific beneficiary (i.e., children, grandchildren, and charity) in their wills. This study uses data from the 1994 Assets and Health Dynamics among the Oldest Old (AHEAD) survey, Wave One and the sample consists of 5,365 households. A conceptual model is developed based on altruistic bequest theory, life-cycle-permanent-income hypothesis, social exchange theory, and the findings of previous research to reflect complexity of estate planning and bequest behavior. Logit regression analysis is employed for the model estimation. Major findings of this study are: (1) estate planning is not actively implemented as significant aspect of financial management practices even among older people; (2) wealthier and better educated people are more likely to be will-holders, but their distributive preferences are similar to those with lower level of wealth and education. Status factors (i.e., financial resources, education) influence whether one has a will, and family or beneficiary characteristics influence whether one is selected as a beneficiary; (3) custodial grandparents have higher likelihood of making a provision for grandchildren in their wills, while they are less likely to name own children as beneficiaries; (4) Black, Hispanic, and other racial groups are less likely to be will-holders. Black are less likely to cite children as beneficiaries than are White, while Black and other racial groups tend to name grandchildren as beneficiaries than are White; (5) those who have a financial advisor are more likely to have a will and name a charity as a beneficiary, holding financial resources and other variables constant; (6) marital relationship is found to be more important than linear relationship, suggesting that current intestate statutes may not reflect people's preferences for favoring their spouses over their children; and (7) the lower likelihood of being named in a will for stepchildren indicates that biological relationships are more important in deciding beneficiaries than step relationships. Lastly, implications for financial educators and planners, policy makers, and fund-raisers in nonprofit organizations, and future research are presented based on the findings.

Degree

Ph.D.

Advisors

Hong, Purdue University.

Subject Area

Finance|Gerontology|Aging|Education

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