Bequest Motive

Published Mar 22, 2024

Definition of Bequest Motive

The bequest motive refers to the intention or desire of individuals to pass on their wealth and assets to their descendants or heirs upon death. This concept is an essential aspect of financial planning and wealth management, highlighting the intergenerational transfer of assets. It encapsulates not only the financial aspect but also the emotional and psychological reasons behind why people wish to leave a legacy for their future generations.

Example

Consider the case of Maria, a retired school teacher who has accumulated a significant amount of savings over her lifetime. Beyond her needs for retirement, Maria is keen on setting aside a portion of her wealth for her grandchildren’s education. She decides to invest in savings bonds and establishes a trust fund specifically earmarked for this purpose. Maria’s aim is to ensure that her grandchildren can afford college education without the burden of student loans, thereby providing them with a solid foundation for their future. This example embodies the bequest motive, demonstrating a deliberate effort to bequeath assets for the benefit of the next generation.

Why Bequest Motive Matters

The bequest motive plays a critical role in economic and social contexts for several reasons. Firstly, it influences saving behavior among individuals, as they may save more than would otherwise be rational for their own use to ensure they have something substantial to pass on. Secondly, it affects wealth distribution and social mobility within societies, as inherited wealth can have a significant impact on the opportunities available to younger generations. Moreover, understanding the bequest motive is crucial for policy-makers, especially in the context of taxation and inheritance laws, as it can inform policies that balance between incentivizing savings and ensuring equitable wealth distribution.

Frequently Asked Questions (FAQ)

What factors influence the strength of the bequest motive in individuals?

Several factors can impact the strength of the bequest motive, including cultural values, family dynamics, the magnitude of wealth, and individual preferences regarding legacy and posthumous recognition. Additionally, economic conditions, tax policies, and the availability of social security can also influence decisions related to bequeathing assets.

How do economists measure the bequest motive?

Economists and researchers often use surveys, estate records, tax returns, and econometric models to understand and measure the bequest motive. By analyzing these data sources, they can infer preferences and patterns related to intergenerational transfers of wealth.

Does the bequest motive only apply to financial assets?

No, the bequest motive can extend beyond financial assets to include real estate, family heirlooms, artworks, and even intangible assets such as family name or educational values. Any asset or value that individuals wish to pass on to their heirs can be considered under the bequest motive.

Can the bequest motive impact economic inequality?

Yes, the bequest motive can have implications for economic inequality. In societies where significant wealth is transferred through inheritance, the bequest motive can perpetuate or even exacerbate wealth disparities, especially if legal and taxation frameworks heavily favor inheritance. This highlights the importance of policy measures that address the balance between encouraging saving and investment and mitigating wealth inequality.

In conclusion, the bequest motive is a complex and multifaceted concept that encompasses not only the financial aspects of inheritance but also the deeper emotional and psychological intentions behind leaving a legacy. Its impacts are far-reaching, influencing individual behavior, societal wealth distribution, and economic policy.