|A Lasting Legacy of the Great Recession: How Changes in Wealth Were Associated with Changes in Bequest Expectations.
|Year of Publication
|Sommer, M, Lim, HN
|Journal of Financial Planning
|Bequests, Financial planning, Great Recession, Wealth
Between 2007 and 2009, American aggregate household wealth declined by 20 percent (Dettling, Hsu, and Llanes 2018). By 2012, however, aggregate household wealth surpassed its 2007 peak and continued to increase through 2016. Although the Great Recession and its subsequent recovery has been extensively studied, little is known about the association between changes in wealth during these periods and changes in bequest expectations. • Based on Hurd and Smith's (2001) model of consumption and saving, we expected a positive relationship between changes in wealth and changes in bequest expectations. The purpose of this study was, however, to explore whether a modest or significant decline in wealth that occurred during the Great Recession was linked with a drop in bequest expectations. Similarly, this study investigated the magnitude of wealth increases during the recovery that were associated with a return to expectations held prior to the Great Recession. • Using data from the Health and Retirement Study (HRS), this research found that during the Great Recession, both significant and modest declines in wealth were associated with a drop in bequest expectations. However, no relationship was found between increases in wealth and a rise in bequest expectations. Following the Great Recession, only wealth increases at the highest end of the distribution were associated with a return to previously held bequest expectations. • Financial planners can use these results to better understand shifts in bequest expectations during various economic cycles and provide the necessary interventions to help clients meet their long-term wealth transfer goals and objectives.