End-of-Life Transfers and the Decision to Care for a Parent

The majority of disabled elderly parents in the U.S. who receive ongoing care are cared for by their children. We have little evidence, however, on the financial and social mechanisms securing the supply of elder care. In recent data on older U.S. families, I find that children rarely receive direct payment for their help. The central question of this study is whether end-of-life transfers act as indirect compensation for caregiving children. I present a dynamic model of the asset choices of a disabled elderly parent in which all intentional bequests are motivated by exchange for care. The parameters of the behavioral model are estimated using AHEAD data on families with unmarried parents who are currently in need of long-term care. Model estimates indicate that the willingness of the adult children in the sample to provide care for their parents responds positively to parents. bequeathable wealth, and the increment to bequeathable assets accompanying care increases with the child.s cost of time. Though these results are consistent with the predictions of the exchange hypothesis, other features of the estimates suggest a substantial altruistic component to caregiving. For example, children whose parents require help with more instrumental activities of daily living, such as shopping and using the telephone, are more likely to provide care at any bequest level. Finally, a policy simulation based on model estimates predicts that a shift of 43 percent of the value of parents. annuitized pensions and Social Security to bequeathable benefits would induce a 4 to 6 percentage point increase in the rate of family caregiving.

Center for Retirement Research at Boston College pursuant to a grant from the U.S. Social Security Administration funded as a part of the Retirement Research Consortium

Altruism/Bequest Motives/Bequests/Caregiving

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