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Resource Category: Inheritances and Gifts

Specific estimates of what share of different racial groups receives these large financial contributions vary somewhat, but in general they tend to show two things: 1) due to the lack of economic security enjoyed by many American families, majorities of all races receive no inheritances or large inter vivos transfers at all; and 2) among those who do receive them, there are large racial disparities, with white Americans more than twice as likely as most other racial groups to receive an inheritance or transfer.

Why Inheritances & Gifts Matter

Financial transfers from family members or friends are one way that state-sponsored racial discrimination in asset building gets passed forward to the present day.

Various racially discriminatory housing policies during the Jim Crow period, for instance, supported white homeownership while proactively excluding Black families. Young adults today are more likely to purchase their first home if their parents benefited from these wealth-building programs in the past, helping contribute to the racial disparities in homeownership that we see today.

Often, this type of intergenerational support comes in the form of inheritances when someone passes away, but it also can come as an “inter vivos transfer,” or a gift made from someone while still alive — like help making a downpayment on a home purchase or help paying for college tuition.

Specific estimates of what share of different racial groups receives these large financial contributions vary somewhat, but in general they tend to show two things: 1) due to the lack of economic security enjoyed by many American families, majorities of all races receive no inheritances or large inter vivos transfers at all; and 2) among those who do receive them, there are large racial disparities, with white Americans more than twice as likely as most other racial groups to receive an inheritance or transfer.

Grandfather and Grandchild

Resource Summaries

Report June 2024

Potential Implications of the Great Wealth Transfer for the Black-White Homeownership Rate Gap

By Michael Neal, Linna Zhu, Amalie Zinn

Urban looks at how the ongoing, generational transfer of wealth affects Black and White families and their future ability to become homeowners.

One key finding is that inequities are highly likely to persist. Because older White families have more wealth — an aggregate amount of $87.9 trillion — and have higher homeownership rates, they have more to give younger generations. Black families, by contrast, have less wealth — an aggregate $1.9 trillion — and lower homeownership rates, so they have less wealth to transfer.

Urban looks at how the ongoing, generational transfer of wealth affects Black and White families and their future ability to become homeowners.

One key finding is that inequities are highly likely to persist. Because older White families have more wealth — an aggregate amount of $87.9 trillion — and have higher homeownership rates, they have more to give younger generations. Black families, by contrast, have less wealth — an aggregate $1.9 trillion — and lower homeownership rates, so they have less wealth to transfer.

It’s also true that most families regardless of race do not receive any inheritances at all from parents and older relatives; and people who rent their homes receive smaller inheritances than homeowners do.

Given these findings, it’s unlikely that this coming transfer can close racially based homeownership gaps. What would help, Urban researchers say, are public policy programs such as first-generation down payment assistance and increasing the supply of affordable housing.

ReadPotential Implications of the Great Wealth Transfer for the Black-White Homeownership Rate Gap on Urban
Summary December 2022

How Big Is the Inheritance Gap Between Black and White Families?

By John Bailey Jones, Urvi Neelakantan

This paper from the Federal Reserve Bank of St. Louis dives deep into Survey of Consumer Finances data on inheritances and gifts, comparing the experiences of Black and white families.

The authors focus on adults between 47 and 70 years of age (since receipt of transfers mostly happens for people at these older ages) and find that 34.8 percent of white respondents had received some sort of inheritance or gift, compared to just 13.2 percent of Black respondents.

This paper from the Federal Reserve Bank of St. Louis dives deep into Survey of Consumer Finances data on inheritances and gifts, comparing the experiences of Black and white families.

The authors focus on adults between 47 and 70 years of age (since receipt of transfers mostly happens for people at these older ages) and find that 34.8 percent of white respondents had received some sort of inheritance or gift, compared to just 13.2 percent of Black respondents.

Among those we do receive a transfer, White individuals receive more money, especially at the higher end of the distribution. Almost 5 percent of White individuals receiving a transfer receive one that’s more than $1 million, whereas virtually no Black transfer recipients in their sample report receiving this much.

The authors also find that while the odds of a white individual receiving a transfer increases steadily as their parents’ education increases, this is much less the case for Black individuals. They speculate that, among Black Americans, “(p)erhaps most college-educated parents were themselves first-generation graduates, inheriting little wealth and having to support their own parents.”

ReadHow Big Is the Inheritance Gap Between Black and White Families? on Federal Reserve Bank of Richmond
Summary March 2022

Racial Wealth Disparities: Reconsidering the Roles of Human Capital and Inheritance

By John Sabelhaus, Jeffrey P. Thompson

This paper adds to common analyses of the Survey of Consumer Finances (SCF) by using novel data approaches to generate a variety of new insights into the relative asset levels of different racial groups. Compared to some other research, for instance, the authors attribute more importance to the role of education and human capital in asset building.

This paper adds to common analyses of the Survey of Consumer Finances (SCF) by using novel data approaches to generate a variety of new insights into the relative asset levels of different racial groups. Compared to some other research, for instance, the authors attribute more importance to the role of education and human capital in asset building.

Specifically, the authors argue that by only looking at broad categories of degree attainment (i.e. college degree, graduate degree, etc.), common measures of human capital understate the true importance of workplace skills and specific choices around field of study for long-term wealth accumulation. This is important because one key determinant of wealth accumulation is lifetime earnings, and lifetime earnings increase dramatically by field of work and years of employment. Therefore, authors add to more common measures of human capital by factoring in estimates of actual job earnings and years of work, finding that these two factors together account for 60 percent of the white/Black wealth gap for families at the median.

The paper also provides new estimates on the receipt of inheritances and inter vivos transfers (i.e. gifts from someone who is still alive). Authors attempt to capture other sources of gifts sometimes missed in the inheritance module of the SCF (like large financial contributions towards the purchase of a home), and come up with slightly higher estimates of inheritances and gifts received by all racial groups.

Despite these slightly higher estimates, the authors find that: 1) most American families, regardless of race, receive no inheritance at all; and, yet, 2) large disparities still persist.

Roughly one-third of white families (with a head aged 55 and older) ever receives an inheritance or inter vivos transfer, 17 percent of “Other” families receive one, 14 percent of Black families receive one, and 8 percent of Hispanic families receive one.

ReadRacial Wealth Disparities: Reconsidering the Roles of Human Capital and Inheritance on Federal Reserve Bank of Boston
Brief 2023

Estate Tax Cuts Worsen Our Large Racial Wealth Gap

By Kurt Wise

ReadEstate Tax Cuts Worsen Our Large Racial Wealth Gap on MassBudget
Academic Paper 2020

Leveling the Playing Field between Inherited Income and Income from Work through an Inheritance Tax

By Lily Batchelder

ReadLeveling the Playing Field between Inherited Income and Income from Work through an Inheritance Tax on The Hamilton Project