Resource Category: Inheritances and Gifts

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

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.”

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.