‘Take the Money and Run’: Dutch Evidence on Inheritance and Transfer Receiving and Divorce

Abstract

This paper aims to investigate whether a wealth endowment, such as an inheritance or a gift, can increase the chances of getting divorced, using Dutch panel data for the period from 2002 to 2016. According to the literature, different factors may lead to the breakdown of a marriage; however, the role played by inherited wealth has never been explored so far. Starting from the idea that the receipt of an inheritance might have an impact on various aspects of an individual’s life, estimations of a Cox proportional hazard ratios model are performed and tests are carried out to establish which variables, with particular attention being given to inherited wealth, act as drivers in increasing the chances of withdrawing from a marriage. The findings suggest that when the wealth endowment has been received by the wife, this increases the chances of the couple separating. This signals that receiving an inheritance/gift changes the bargaining power between the couple: for the husband, it does not represent an incentive to divorce, while the results suggest that the wife might perceive a change in the bargaining power, increasing the likelihood of marital disruption.

Effects of Lottery Wins on Household Labor Supply

“…The effect of inheritances and gifts on labor supply has also been extensively analyzed in Europe recently (Doorley and Pestel, 2020;Malo and Sciulli, 2021;Basiglio, 2022;Tur-Sinai et al, 2022;Suari-Andreu, 2023). Doorley and Pestel (2020) examine the effect of inheritances in Germany, using data from the German Socio-Economic Panel (SOEP), finding that women are less likely to work full-time and that their hours of work decrease after receiving an inheritance.…”

“…By contrast, men appear not to respond. Basiglio (2022) takes a different approach, focusing on the likelihood of divorce, using Dutch panel data from 2002 to 2016. Her findings suggest different impacts according to the recipient, and when the shock (any inheritance and/or gift) is received by the wife the probability of the couple separating increases.…”

Subjective Inheritance Expectations and Economic Outcomes

“…As inheritances and bequests may vary with the institutional setting, it seems useful to discuss how inheritances and inter-vivos transfers are treated by the Dutch tax system. As explained by Basiglio (2021), inheritances and inter-vivos transfers are taxed if they exceed certain thresholds, where the tax rates and the exempted amounts depend on the "intergenerational relationship" between the provider of the gift or inheritance and the recipient. For example, inheritance from parents is taxed if it exceeds approximately €20,000 (the amount varies somewhat across years), the tax rate on the first €120,000 above that is 10 percent and the marginal tax rate on higher amounts is 20 percent.…”

“…For example, inheritance from parents is taxed if it exceeds approximately €20,000 (the amount varies somewhat across years), the tax rate on the first €120,000 above that is 10 percent and the marginal tax rate on higher amounts is 20 percent. Inter-vivos transfers to children are not taxed if they are lower than €5,300 in a given year, and sometimes even up to higher amounts (under special conditions; see the appendix of Basiglio (2021) for details). These tax rules may affect the tendency to save to leave a bequest, but also make it attractive to avoid large inheritances using inter-vivos transfers.…”