The Twentieth-Century Revolution in Family Wealth Transmission
The main purpose of this article is to sound a pair of themes about the ways in which these great changes in the nature of wealth have become associated with changes of perhaps comparable magnitude in the timing and in the character of family wealth transmission. My first theme, developed in Part II, concerns human capital. Whereas of old, wealth transmission from parents to children tended to center upon major items of patrimony such as the family farm or the family firm, today for the broad middle classes, wealth transmission centers on a radically different kind of asset: the investment in skills. In consequence, intergenerational wealth transmission no longer occurs primarily upon the death of the parents, but rather, when the children are growing up, hence, during the parents’ lifetimes.
My other main theme, developed in Part III, arises from the awesome demographic transformation of modern life. For reasons that I shall explore, those same parents who now make their main wealth transfer to their children inter vivos are also living much longer. The need to provide for the parents in their lengthy old age has put a huge new claim on family wealth, a claim that necessarily reduces the residuum that would otherwise have passed to survivors. A new institution has arisen to help channel the process of saving and dissaving for old age: the pension fund. The wealth of the private pension system consists almost entirely of financial assets. I shall emphasize a distinctive attribute of pension wealth, namely, the bias toward annuitization. When wealth is annuitized, virtually nothing is left for transfer on death.
Thus, wealth transfer on death is ever less characteristic of family wealth transmission. Part IV relates these great changes in family property relations to the residual process of wealth transfer on death.