Uncertain Lifetime, Bequest, Annuity and Capital accumulation under different motives of Bequests.

Abstract

Joy of giving and dynastic altruism are considered as two motives for bequests. This paper studies a lifecycle model with lifetime uncertainty under these two motives. We find that accidental bequests and planned bequests are equal under both motives, which allows us to track down family decisions across generations that are independent of the mortality history in the family. However, the allocations of bequests, annuity savings, non-annuity savings and consumptions are different between models with either of the two motives. Under the dynastic altruism model, bequests are compensatory and transfers from children to parents are also possible. More importantly, rising longevity has no impact on capital accumulation per capita in the dynastic model unlike a positive effect on capital accumulation in the joy-of-giving model. These results with dynastic altruism are consistent with some existing empirical results, supporting the validity of the dynastic model.