MEF-Seminar Summer 2025

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The timing of transfers is critical to their value for recipients. Thus, although the bulk of family transfers occurs in the form of inheritances, inter-vivos trans- fers may be far more valuable than their size suggests. To uncover the economic importance of inter-vivos transfers to recipients, we propose a tractable lifecy- cle model of the family capable of reproducing salient features of the data. We then use the model to address the consumption insurance puzzle based on Blun- dell et al. (2008). The model has the potential to narrow the gap between actual consumption insurance in the data and that predicted by standard incomplete- markets models. The model may also provide a novel rationale for the preferen- tial tax treatment of inter-vivos transfers relative to bequests.

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