Technical Paper Series

Congressional Budget Office

Washington, DC

TESTING FOR A BEQUEST MOTIVE 

USING CROSS-STATE VARIATION IN BEQUEST TAXES

Benjamin R. Page

Congressional Budget Office

Washington, DC

E-mail: benp.mad@cbo.gov

April 2003

2003-1

Technical papers in this series are preliminary and are circulated to stimulate

discussion and critical comment. These papers are not subject to CBO’s formal

review and editing processes. The analysis and conclusions expressed in them

are those of the author and should not be interpreted as those of the

Congressional Budget Office. References in publications should be cleared with

the author. Papers in this series can be obtained by sending an e-mail to

techpapers@cbo.gov.
Abstract

There are two broad categories of explanations for why people leave bequests.

Bequests may be intentional, for a variety of reasons including altruism, “joy of

giving,” or strategic considerations. Or they may simply be accidental, because

people hold wealth for various reasons and life spans are uncertain. This paper

attempts to determine whether bequests are intentional or accidental by looking at

the effect of state bequest taxes (estate or inheritance taxes) on the giving of gifts

while people are alive. If bequests are accidental, bequest taxes should have no

effect on gift-giving; they are irrelevant to the consumer’s behavior. However, if

bequests are intentional, higher bequest taxes may lead people to substitute

additional gifts for bequests, because higher taxes make gifts a relatively cheaper

form of wealth transfer. The paper finds evidence that people in higher-tax states

do give more gifts, controlling for wealth and other variables. That finding

suggests that at least some part of bequests is intentional.

Journal of Economic Literature Classification Numbers: E21, H24

Key Words: bequest, inheritance tax, gift, bequest motive

Helpful comments from Peter Diamond, Jon Gruber, Doug Hamilton, Steve

Pischke, Kent Smetters, and two anonymous referees are gratefully acknowledged.
1. See Andreoni (1989); Bernheim, Schleifer, and Summers (1985); and Kotlikoff and Spivak

(1981) for discussions of various bequest motives.

2. See Abel (1987) for a discussion of operative bequest motives.

3. For example, Bernheim (1991) finds evidence for an operative bequest motive based on demand

for life insurance, while Hurd (1989) finds no evidence for a bequest motive that is stronger for

people with children. Other empirical studies include Hamermesh and Menchik (1987); Wilhelm

(1996); Laitner and Juster (1996); Joulfaian (2001); and Bernheim, Lemke, and Scholz (2001).

1

INTRODUCTION

The motivation for bequests has implications for a number of important economic

issues, including the economic effects of government deficits, the incentive effects

of bequest taxes, and the proper design of policies to increase the capital stock. 

Explanations for bequests fall into two broad categories: intentional and unintentional. First, there are many reasons individuals might intend to leave bequests,

including altruism, the “warm glow” from giving, strategic manipulation of heirs,

or an implicit contract for annuities.1 In contrast, since no one knows exactly

when they will die, bequests may simply be accidental. A person must save some

assets up to the point of death to guard against the possibility of a long life, or they

risk being left with nothing in their old age (Abel, 1985). I define bequests as

unintentional if the donor’s optimal level of bequests is zero; that is, if there is no

operative bequest motive.2 In that case, consumption and savings behavior are not

influenced by a desire to leave a bequest. 

This does not necessarily mean that individuals do not get utility from the

knowledge that their heirs will benefit from their estate, or that decedents would

not prefer to see their estate go to their heirs rather than the government, a fact

that seems clear from casual observation. Bequests can be unintentional even if

they enter the utility function as long as the donor is at a corner solution demanding zero bequests. 

Empirical research on the existence of an operative bequest motive has

yielded inconsistent results.3 In this paper, I attempt to establish whether or not

bequests are intentional by investigating whether marginal tax rates on bequests

have an impact on the giving of inter vivos gifts. If bequests were purely accidental, inheritance and estate taxes should have no effect on inter vivos gifts. If, in

contrast, at least some part of bequests was intended, higher tax rates could lead

individuals to substitute gifts for bequests. 

Separating the effects of higher tax rates on gift-giving from those of

wealth is potentially difficult because wealthier individuals tend to both face higher
4. Assuming the marginal utility of bequests falls monotonically with increasing bequests, the

bequest motive is inoperative at a given point in time if the marginal utility of current consumption along the optimal consumption path is less than the expected discounted marginal utility of

bequests evaluated at zero bequests: Uc(c=c*, b=0) > E(Ub(c=c*,b=0)). Trivially, if this condition

holds with zero taxes, then the corresponding equation including a bequest tax that applies with

2

tax rates on bequests and give more gifts. In order to identify the effect of taxes

independent of wealth I utilize cross-state differences in bequest taxes. State taxes

are ideal for the purposes of this study, not only because they provide variation in

tax rates for individuals with similar assets, but also because in many cases they are

levied on estates much smaller than those subject to federal estate taxes and thus

affect a much higher percentage of decedents. I find evidence that higher inheritance tax rates significantly increase the giving of gifts, indicating that at least some

part of bequests is in fact intentional. 

Two recent papers also investigate the effect of taxes on substitution

between bequests and gifts. Bernheim, Lemke, and Scholz (2001) examine

whether changes in the federal estate tax affected the gift-giving of households

differently depending on the impact of the changes on expected marginal bequest

taxes. Joulfaian (2003) uses federal estate tax data to investigate whether the

differential tax price of estates versus gifts (including both federal and state taxes)

affects the giving of gifts. Both papers find evidence of substitution between gifts

and bequests. This paper finds a similar effect, but for a much broader sample of

households than the small percentage of high-wealth households subject to federal

estate and gift taxes.

THEORETICAL FRAMEWORK

Formally, I assume that both gifts and desired bequests are a function of various

characteristics of the household as well as the taxes on both gifts and bequests:

1) B = f(tB, tG, ZB)

2) G = f(tB, tG, ZG)

where B is the desired level of bequest, tB is the marginal tax rate on bequests, tG is

the marginal tax rate on gifts, and ZB and ZG are vectors of household characteristics such as wealth and age.

If bequests do not enter the utility function, desired bequests equal zero

and differing levels of bequest taxes should have no influence on desired gifts—

that is, the derivative of equation 2 with respect to tB should be zero. Similarly, if

the bequest motive is so weak that desired bequests are zero at a zero tax rate,

once again tB should have no effect on gifts.4 In other words, the level of bequest
certainty, Uc(c=c*, b=(1-t)*0) > (1-t)*E(Ub(c=c*, b=(1-t)*0), must also hold for a positive tax 

rate t. 

5. A separate high-income sample of 438 households was also interviewed, but for reasons of

privacy the state of residence of those households is not identified, making it impossible to

identify the bequest tax rates that they faced.

3

taxes should not affect the giving of inter vivos gifts in the absence of an operative

bequest motive. 

But if there is an operative bequest motive and gifts are a gross substitute

for bequests, then an increase in bequest taxes will increase the level of desired

gifts in households that planned gifts before the tax hike and may induce some

households to shift from zero planned gifts to a positive level. 

While it cannot be established theoretically that gifts are a substitute for

bequests (the precise relationship depends on the type of bequest motive and the

functional form of utility), there is every reason to think that they should be. Both

gifts and bequests perform the same role—transferring resources to another individual. The empirical strategy followed in this paper is to estimate a version of

equation 2 and test the null hypothesis that bequest taxes have no effect on gifts. 

Rejection of the null is taken as evidence in favor of a bequest motive. 

DATA

The data in this study come from the 1983 and 1986 Survey of Consumer Finances

(SCF). The 1983 survey interviewed a random sample of 3,824 households on

wealth, income, pensions, and other areas.5 In 1986, 2,822 of those households

were reinterviewed; in addition to a subset of the 1983 questions, they were asked

about gifts given and received. In particular, each household reported the threeyear total of all gifts given to friends or relatives in every case in which the gifts to

a particular individual totaled a cumulative $3,000 or more. The survey missed

any gifts to individuals that did not cumulate to $3,000 over the three years. (For

example, if a gift of $1,000 was given to the same individual in each of the three

years, a gift of $3,000 would be recorded; however, if gifts totaling $2,000 over

three years were given to each of several different individuals, no gifts would be

recorded.) 

The recorded level of gifts is therefore an imperfect proxy for total gifts to

all individuals—it is both censored at $3,000 and measured with error because

small gifts are not included. In addition, gifts are probably reported with error in

the survey. The measurement error would bias the results if the error was correlated with the independent variables. However, there is little reason to think that
4

spreading small gifts among many recipients, or reporting errors, would be correlated with variables such as wealth or bequest tax rates. Moreover, it seems likely

that gifts given to avoid inheritance taxes tend to be large. In any case, all other

things being equal, if smaller gifts were affected by taxes the unavailability of that

data should bias against finding any effect of bequest taxes. 

I test for the effect of tax rates on giving in two separate subsamples of

households in the SCF—those with heads of household over age 25, and those

with heads of household over 65. I predict that tax rates are more likely to affect

giving among the elderly, for whom bequest taxes are a more immediate concern. 

The two subsamples include 2,235 and 384 households, respectively. 

The primary independent variable I use is the marginal state bequest tax for

each household as of October 1, 1983. (Using tax laws from 1986, the end of the

period over which gifts were measured, yielded similar results.) Calculation of the

marginal tax rate is somewhat problematic. State bequest taxes take one of three

forms. Fourteen of the states represented in my sample levied only an estate tax

sufficient to absorb the maximum federal tax credit for state bequest taxes. In

those 14 states, the (state) marginal tax rate is effectively zero for all individuals. 

Another eight states levied an estate tax above and beyond the federal

credit. That tax is a function of the total estate left by the decedent, and it applies

to the estate before its distribution to heirs. 

Lastly, 15 states represented in the sample imposed an inheritance tax. 

That tax is levied separately on the amounts bequeathed to each recipient. As a

result, in a state with an inheritance tax, the tax will depend not only on the size of

the estate, but also on how it is divided among heirs. For example, because

inheritance taxes are in most cases graduated and include exemptions for each

recipient, an estate divided among many heirs will face lower taxes than an estate

given to only one person. 

As a further complication, the tax rate often depends on the decedent’s

relationship to the heir. Surviving spouses and children tend to face lower tax

rates than unrelated individuals, with other close relatives sometimes paying intermediate rates. Calculation of a precise tax rate thus requires detailed knowledge

of the household’s bequest plans, which is not available. 

 

I assume that households with living children will divide the estate equally

among them. Menchik (1980) finds evidence in a sample of Connecticut probate

records that this type of equal division is the norm. In the absence of records on

other relatives, I assume that childless households plan to bequeath to a single
6. Including a dummy variable equal to one for states that had a gift tax had virtually no effect on the

regression results.

7. Age in this case acts as a proxy for variables such as mortality rates or expected remaining

lifetime, but those variables are highly correlated with age.

5

relative in the next closest category, as defined by the individual state (this

category typically includes brothers and sisters, for example). 

A significant issue under either type of tax is the number of adults in the

household. Households headed by couples can limit their total tax liability by

spreading out the total bequest to the ultimate heirs over two estates; thus, they

may be less likely to give gifts. I attempt to control for that problem by including,

in the regressions that follow, a dummy variable for households headed by singles,

and in one variant I also include the dummy variable interacted with the bequest

tax rate to allow the effect of the tax rate to differ for singles and couples.

Another potential problem is that 10 states represented in the sample levied

a tax on gifts as well as bequests. Those gift taxes, however, tend to have

generous exemptions. Typically, the laws follow the federal gift tax in allowing

$10,000 in gifts per recipient per year tax free. This means that, for example, a

single parent with two children could give $60,000 to her children tax free over the

three-year period studied if it was evenly divided between the children over the

three years. In practice, assuming donors divided their three-year total of gifts

evenly across children and years, no one in the samples I use would have incurred

any state gift taxes. Because, using the same assumption for division of gifts as for

bequests, everyone in the sample would face a state marginal gift tax rate of zero, I

did not include any measure of state gift tax rates in the analysis.6

There is also a question of timing. I measure the marginal tax rate that

would apply to an estate if the owner died the next day. In fact, the date of death

is uncertain (for most people, at least). Older individuals, having higher mortality

rates, are more likely to face those taxes at any given moment. Moreover, there

are independent reasons to think that older individuals might be more likely to give

gifts (for example, they have resolved more of their lifetime uncertain expenses). 

In fact, several studies have found that older individuals give more gifts (see, for

example, Gale and Scholz, 1994). For those reasons, I include age as an independent variable in my regressions.7

 

The federal government also levies an estate tax, with marginal rates far

above those levied by any state. Although lifetime gifts are included in the taxable

estate, the federal tax may encourage substitution of gifts for bequests because
8. Larger gifts are also tax advantaged relative to bequests because taxes on lifetime gifts are

deductible from the taxable estate. Gifts gain a further advantage if recipients face lower

marginal income tax rates than donors on the returns from the transferred assets.

9. Determining which households are subject to federal estate tax is problematic, for several

reasons. In 1983, estates above $275,000 were taxable, but the law at that time scheduled

increases in the unified credit applied to estates, which meant that by 1987 estates above

$600,000 would be taxable. I assume that households influenced by the estate tax tend to be

planning a number of years in advance, so households with over $600,000 behaved as if they

faced federal estate taxes on the margin. Using a limit of $275,000, or intermediate values, did

not significantly change the results. In addition, the relevant variable is wealth at time of death,

but only current wealth is available in the SCF. Projecting that wealth forward would be

problematic, especially for the elderly portion of the sample I concentrate on, because wealth

could either rise or fall depending on the consumption behavior of the household. For simplicity I

use unadjusted current wealth.

6

gifts of up to $10,000 per year per recipient are exempt from taxation.8 In order to

take account of the effect of the federal estate tax on gift-giving, I include in the

regression a dummy variable for estates large enough to be subject to federal tax. 

To the extent that the dummy variable is an accurate indicator of whether a

household is subject to federal estate taxes, it should control for the effects of the

federal tax, which applies equally regardless of state of residence.9

As in any empirical work that utilizes cross-state differences, there is some

danger that right-hand-side variables could be endogenously determined. In this

case, the makeup of a state's population could influence that state’s bequest taxes,

and the taxes in a state could influence which households choose to live there. If

gifts and bequests were actually close substitutes as I have assumed, however, the

endogeneity could bias the results in favor of the null hypothesis of taxes having no

effect. Assume, for example, that there are two types of people, generous and

stingy, where generous people want to transfer money to others (both inter vivos

and via bequests) and stingy people do not. Then states with a majority of generous people are likely to vote in laws for low inheritance taxes, but also have a

higher level of gifts. Moreover, the generous elderly will have a motivation to

move to states with low taxes, again producing a negative correlation between

taxes and gifts. 

This is, of course, only one of many possible stories. A model in which

some people prefer to give via gifts and others prefer to give via bequests would

lead to the opposite conclusion. Ultimately, to take the results obtained in this

paper at face value requires the assumption that endogeneity does not significantly

affect the assignment of tax laws to individuals. 

State inheritance and estate tax rates were obtained from the Commerce

Clearing House State Tax Handbooks for 1982 and 1986, the Commerce Clearing

House State Tax Guide, and the tax codes of a number of different states. Table 1
7

shows the calculated tax rates for families with assets of $50,000, $200,000, and

$500,000 for all the states that would levy nonzero taxes on estates of that size. 

The rates are calculated under the assumption that the families all have one child

who will receive the entire estate. The marginal tax rates on the smallest estate

reach a high of 6 percent in Pennsylvania and South Dakota, while those on the

largest estate are highest in Oregon, at 12 percent. While there is a fair amount of

variation in the tax rates shown, a large part of the sample variation is between the

states shown and those with marginal tax rates of zero. 

In addition to the tax rate, I include two separate measures of resources as

independent variables in the tables. Net wealth in 1983 is simply current assets

minus liabilities at the beginning of the sample period. The net present value of

pensions and Social Security is the total annuity value of all the pensions plus

Social Security payable to members of the household (that is, the stream of

payments discounted by both the interest rate and the probability of death). Net

wealth and net present value of pensions are both expected to positively affect

gifts. Pensions might be expected to affect gifts more than net wealth because they

cannot be bequeathed.

The regressions also include a dummy variable equal to one for households

with a living child and a variable for the age of the household’s head. Both are

expected to have positive coefficients—the dummy variable because people may be

more likely to give gifts to children than to others, and age because bequest taxes

become a more immediate concern as people age and mortality rates rise.

Table 2 shows means of the variables used for various subsets of households. The sample mean of gifts is $1,447 for households with heads over age 25,

but among the subset that reported gifts of over $3,000 (that is, those with nonzero gifts as measured by the survey), the mean gift was over $10,000. Households

with heads over age 65 gave almost three times as much. The marginal bequest

tax averaged 1.40 percent for over-25 households and 1.78 percent for those who

gave gifts. Among the older households, tax rates averaged more than twice as

high for givers as for all households. Wealth is significantly greater for those who

gave gifts. 

RESULTS

I investigate the effect of tax rates on the dollar amount of gifts given by estimating equation 2 using a Tobit formulation to account for the censoring of gifts
10. Probit regressions, omitted for brevity, indicate that the marginal tax rate has an effect on the

probability of giving gifts that is statistically significant at the 1 percent level in most formulations, providing support for the existence of a bequest motive.

11. The term “desired gifts” is used because that is the latent variable being estimated. In this case,

the latent variable desired gifts equals actual gifts both above and below the censoring limit of

$3,000, as long as it is greater than zero. The $3,000 lower limit on data on gifts is artificial,

unlike (for example) the familiar constraint that labor hours be nonnegative. In addition to the

effect on desired gifts, marginal tax rates also could raise the probability of giving a nonzero gift. 

However, because the data on gifts is censored at $3,000, it is not possible to estimate that effect

or to estimate the total marginal effect on actual, rather than desired, gifts.

12. The equation was also estimated with a variable interacting the tax rate with the dummy variable

for children. The effect of that interaction term was not estimated to be statistically significant in

any of the samples.

8

under $3,000 (see Table 3).10 The estimated effect of the bequest tax rate on the

level of gifts is positive and significant at the 5 percent level both for households

headed by people over 25 (column 1) and those headed by people over 65 (column

2), supporting the hypothesis that bequests are intentional. However, the effect is

much stronger for the older households, and column 3 shows that the tax rate is

not estimated to have a significant effect on giving for households headed by

people 25-65. The measured effect on older households is large: a 1 percentage

point increase in the marginal tax rate is associated with almost $4,000 in

additional desired gifts over a three-year period.11 

The point estimate of the effect of pension wealth on gift-giving is larger

than that of bequeathable wealth in all the regressions, but the effect is not

statistically significant for the older households. The coefficients on kid, single,

and age enter positively, as expected. 

I next test whether tax rates affect households differently depending on

whether they are headed by singles or couples by including a term multiplying the

tax rate by the dummy variable for single heads of household. Table 4 shows that

the coefficient on the interaction term is statistically insignificant for all the

samples, providing no evidence for a differential effect on singles and couples. In

addition, the other coefficients are almost unchanged, although the coefficient on

the tax rate is now estimated more imprecisely. A likelihood ratio test of the

hypothesis that coefficients on both the marginal tax rate and the interaction term

are zero is not significant at the 10 percent level for any of the regressions,

providing no support for a bequest motive, but there is little evidence that the

interaction term should be included in the regression.12

 

Finally, in order to allow for a nonlinear response of gifts to the tax rate as

well as dampen the influence of large observations of gifts and wealth, the basic

regressions were also run using the log of wealth and gifts. (Observations with a
9

zero or negative value for gifts or wealth were assigned a “log” value of zero.) 

Table 5 shows that the marginal bequest tax rate is estimated to have a statistically

significant (at the 5 percent level) effect on gift-giving for older households. 

However, the estimated effect on over-25 households is not statistically significant.

CONCLUSION

The lack of direct data on bequests makes it very difficult to investigate bequest

motives. Like several other studies, this paper attempts to surmount the data

problem by studying variables with an indirect relation to bequests. It shows that

there is a strong positive correlation between bequest tax rates and the likelihood

of giving a large amount of gifts. There is also a positive correlation between the

amount of gifts given and tax rates, especially for older households. These facts

are consistent with the existence of intentional rather than unintentional bequest

motives in at least some portion of the population. 

11

BIBLIOGRAPHY

Abel, Andrew B., 1985, “Precautionary Saving and Accidental Bequests,”

American Economic Review, vol. 75, no. 4, pp. 777-791.

Abel, Andrew B., 1987, “Operative Gift and Bequest Motives,” American

Economic Review, vol. 77, no. 5, pp. 1037-1047.

Andreoni, James, 1989, “Giving with Impure Altruism: Applications to Charity 

and Ricardian Equivalence,” Journal of Political Economy, vol. 97, no. 6, 

pp. 1447-1458.

Auerbach, Alan J., Laurence J. Kotlikoff, and David N. Weil, The Increasing

Annuitization of the Elderly—Estimates and Implications for Intergenerational

Transfers, Inequality, and National Saving, Working Paper No. 4182 (Cambridge,

Mass.: National Bureau of Economic Research, 1992). 

Bernheim, B. Douglas, 1991, “How Strong Are Bequest Motives: Evidence Based

on Estimates of the Demand for Life Insurance and Annuities,” Journal of

Political Economy, vol. 99, no. 5, pp. 897-927.

Bernheim, B. Douglas, Andrei Schleifer, and Lawrence Summers, 1985, 

“The Strategic Bequest Motive,” Journal of Political Economy, vol. 93, 

pp. 1045-1076.

Bernheim, B. Douglas, Robert J. Lemke, and John Karl Scholz, Do Estate and

Gift Taxes Affect the Timing of Private Transfers? Working Paper No. 8333

(Cambridge, Mass.: National Bureau of Economic Research, June 2001).

Gale, William G., and John Karl Scholz, 1994, “Intergenerational Transfers and 

the Accumulation of Wealth,” Journal of Economic Perspectives, vol. 8, no. 4, 

pp. 145-160.

 

Hamermesh, Daniel S., and Paul L. Menchik, 1987, “Planned and Unplanned

Bequests,” Economic Inquiry, vol. 25, no. 1, pp. 55-66.

 

Hurd, Michael D., 1989, “Mortality Risk and Bequests,” Econometrica, vol. 57,

no. 4, pp. 779-813. 

Joulfaian, David, “Choosing Between Gifts and Bequests: How Taxes Affect the

Timing of Wealth Transfers,” (mimeo, 2003).
12

Kotlikoff, Laurence J., and Avia Spivak, 1981, “The Family as an Incomplete

Annuities Market,” Journal of Political Economy, vol. 89, no. 2, pp. 372-391.

Laitner, John, and F. Thomas Juster, 1996, “New Evidence on Altruism: 

A Study of TIAA-CREF Retirees,” American Economic Review, vol. 86, no. 4,

pp. 893-908.

Menchik, Paul L., 1980, “Primogeniture, Equal Sharing, and the U.S. Distribution

of Wealth,” Quarterly Journal of Economics, vol. 94, no. 2, pp. 299-316.

Wilhelm, Mark O., 1996, “Bequest Behavior and the Effect of Heirs’ Earnings:

Testing the Altruistic Model of Bequests,” American Economic Review, vol. 86,

no. 4, pp. 874-892.
13

Table 1.

Marginal state tax rates on bequests of different sizes

State Tax type

Marginal tax rate (in percent) on bequest of

$50,000 $200,000 $500,000

Connecticut Inheritance 4.29 5.72 8.58

Indiana Inheritance 2 3 5

Iowa Inheritance 1 8 8

Kentucky Inheritance 5 7 10

Louisiana Inheritance 3 3 3

Maine Inheritance 3.9 5.2 6.5

Maryland Inheritance 1 1 1

Massachusetts Estate 0 9 11

Michigan Inheritance 2 4 7

Minnesota Estate 0 0 10

Mississippi Estate 0 1 3.2

Nebraska Inheritance 1 1 1

New Jersey Inheritance 3 6 8

New York Estate 0 4 6

North Carolina Inheritance 0 6 7

Ohio Estate 3 5 7

Oklahoma Inheritance 0 1.5 6.5

Oregon Estate 0 12 12

Pennsylvania Estate 6 6 6

South Carolina Estate 0 7 8

South Dakota Inheritance 6 7.5 7.5

Tennessee Inheritance 0 0 6.5

Wisconsin Inheritance 2.5 10 10

Note: Tax rates shown are the rate on an additional dollar bequeathed to a single child as of

October 1, 1983.
14

Table 2.

Sample means of data

Variable

Age of household head 

over 25

Age of household head 

over 65

Full sample If gifts >

$3,000

Full sample If gifts >

$3,000

Total gifts ($) 1,447 10,932 3,701 29,610

Marginal tax rate 

on bequest (%)

1.40 1.78 1.41 3.08

Net wealth ($) 115,446 187,315 141,527 454,124

Present value of pensions ($) 63,843 84,068 118,594 156,197

Federal tax .026 .072 .036 .208

Kid .858 .910 .893 .938

Single .067 .066 .422 .313

Age 43.43 47.38 72.88 72.25

N 1,851 166 384 48

Notes: Total gifts is the dollar amount of gifts given to other households between 1983 and 1986

(gifts to households totaling less than $3,000 over the period are excluded). Marginal tax rate on

bequest is the marginal state tax rate on a bequest according to 1983 tax codes (see Data section

for notes on derivation). Present value of pensions is the net present value of all pensions,

disability payments, and Social Security. Federal tax is a dummy variable equal to one if the

household has enough wealth to be subject to federal estate and gift taxes. Kid is a dummy

variable equal to one if the head of household has living children. Single is a dummy variable

equal to one if the household head is single. Age is the age of the household head. 
15

Table 3.

Tobit estimation with dependent variable gifts (in dollars) 

Age of head > 25 Age of head > 65 Age of head 26-65

Marginal tax rate on

bequest

1,108

(2.09)

3,970

(2.03)

393

(1.14)

Net wealth x 10-6 .004

(1.32)

.065

(2.65)

.001

(0.33)

Net present value of

pensions x 10-6

.077

(4.12)

.119

(1.23)

.049

(4.00)

Federal tax 35,175

(4.72)

24,352

(0.67)

13,626

(2.70)

Kid 8,607

(1.59)

32,951

(1.31)

3,858

(1.16)

Single 5,997

(1.21)

20,001

(1.32)

2,083

(0.55)

Age 97.28

(0.73)

61.02

(0.06)

73.10

(0.66)

Log likelihood -2,965.82 -670.80 -674.84

N 2,235 384 1,851

Note: Absolute values of asymptotic t-statistics are shown in parentheses.
16

Table 4.

Tobit estimation with dependent variable gifts (in dollars) 

Age of head > 25 Age of head > 65 Age of head 26-65

Marginal tax rate on

bequest

1,060

(1.92)

3,970

(1.69)

405

(1.16)

Marginal tax rate *

single

518

(0.31)

1.42

(0.00)

-690

(0.25)

Net wealth x 10-6 .004

(1.32)

.065

(2.65)

.001

(0.33)

Net present value of

pensions x 10-6

.077

(4.13)

.119

(1.23)

.049

(4.00)

Federal tax 35,337

(4.73)

24,354

(0.66)

13,597

(2.70)

Kid 8,715

(1.60)

32,954

(1.24)

3,896

(1.17)

Single 5,445

(1.03)

19,999

(1.22)

2,454

(0.60)

Age 94.59

(0.70)

61.02

(0.06)

73.72

(0.66)

Log likelihood -2,965.77 -670.80 -674.84

N 2,235 384 1,851

Note: Absolute values of asymptotic t-statistics are shown in parentheses.
17

Table 5.

Tobit estimation with dependent variable log (gifts) 

Age of head > 25 Age of head > 65 Age of head 26-65

Marginal tax rate on

bequest

.029

(1.12)

.146

(2.34)

-.000

(0.01)

Log (net wealth) .285

(5.29)

.329

(2.59)

.252

(4.46)

Log (net present

value of pensions)

.004

(0.17)

1.12

(2.61)

-.013

(4.00)

Federal tax 1.02

(2.96)

2.15

(2.81)

.377

(1.00)

Kid .269

(1.02)

1.04

(1.33)

.123

(0.47)

Single .171

(0.67)

.926

(1.81)

.357

(1.10)

Age .012

(1.50)

.034

(0.96)

.021

(1.75)

Log likelihood -866.10 -179.18 -674.84

N 2,235 384 1,851

Note: Absolute values of asymptotic t-statistics are shown in parentheses.