Why Your Black and Hispanic Clients Need a Will

Who Leaves Bequests?

In running the analysis, the CRR researchers find that, relative to white Americans, Black and Hispanic recipients of bequests tend to receive less, and the results also show that having received an inheritance is related to having a will, even when controlling for race and ethnicity.

The researchers go on to show the relationship between race and ethnicity and having received an inheritance to planning to leave a bequest of at least $10,000, $100,000, and $500,000, respectively. For example, a non-Hispanic Black individual is about 5 percentage points less likely to expect to leave a bequest of at least $10,000 than a white respondent.

These results are generally consistent across bequest amounts, according to the CRR researchers. That is, having received an inheritance increases the likelihood of leaving bequests of all amounts, and non-white respondents report lower expected probabilities of leaving moderate bequests.

“This sign flips, however, for bequests of at least $500,000,” the researchers note. “One possible explanation is that non-white individuals who are very successful feel a strong obligation to ensure that assets are left to their family.”

Intent and Achievement

The researchers argue these results regarding both wills and bequest intentions reflect individuals’ plans to leave a legacy, and the next section of their analysis turns to the question of whether these intentions are achieved, whether wills help in this process, and whether the process varies by race.

According to the analysis, in terms of race and ethnicity, for the $10,000 target, only the Hispanic ethnicity is significantly related to a lower likelihood of leaving the target bequest, while being a Black American is not predictive of failing to achieve the targeted bequest.

“However, the latter coefficient goes in the anticipated direction, with Black decedents more likely to fall short of their goal,” the researchers note. “The relatively weak significance of the Black coefficient is unsurprising given the modesty of the goal. Turning to the $100,000 and $500,000 targets, Black and Hispanic decedents are less likely to meet their target … Strikingly, though, across race and ethnicity, those with wills are less likely to fall short of their expected bequests at each of the target amounts.”

According to the researchers, these results underscore the racial gap in bequests, since even for those with the same expectation of leaving a bequest, Black and Hispanic decedents fail to meet their targets more often.

“This finding is particularly alarming, given that Black and Hispanic respondents have both much lower expectations of leaving substantial bequests to begin with and are less likely to have a will,” the researchers explain. “The good news is that wills seem to mitigate such failures, either by preserving value postmortem or by shifting behavior throughout life, such as lowering consumption to guarantee bequest goals are met.”

Conclusion for Financial Professionals

One clear conclusion drawn in the new analysis is the simple fact that having a will is important for the many households whose circumstances are not adequately addressed in state default inheritance laws.

As noted, wills are particularly valuable when the major bequeathable asset would likely decline in value from being split among multiple owners, as default laws tend to do.

“This analysis shows that the rate of intestacy is especially high among Black and Hispanic individuals, even after controlling for a wide array of demographic and socioeconomic characteristics,” the researchers explain. “Relatedly, these individuals are also less likely to expect to leave bequests of meaningful size.”

In the end, the evidence suggests that Black and Hispanic decedents, conditional on how likely they thought achieving a certain bequest size was, are less likely to achieve that goal.

However, having a will is related to a greater likelihood of attaining bequest goals, offering a potential route for improving this situation, and one that financial professionals can take advantage of in their planning work alongside clients.

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