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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.

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

A Great Wealth Transfer is underway in the United States, with older generations passing resources to younger ones. This will create new economic opportunities for young families, but disparities in race and income are creating starkly different outcomes.

A Great Wealth Transfer is underway in the United States, with older generations passing resources to younger ones. This will create new economic opportunities for young families, but disparities in race and income are creating starkly different outcomes.

Urban researchers point out that White households have more wealth to transfer than Black households, and this difference could in turn widen the racial homeownership gap.

There are also concerning gaps within the Black community. Young Black families that already own homes expect to inherit more wealth than young Black renters do. Yet, since there are comparatively fewer younger Black families that own homes at all, Black households are likely to get even less of the inheritance share than other groups. Indeed, regardless of race, few families will receive an inheritance at all.

To escape this cycle, Urban argues that policymakers should work to increase the overall supply of affordable housing and by promoting homeownership among young Black families and first-time homebuyers

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.”

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.

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