Unfree Wills: Inheritance Rules, Bequest Motives, and Wealth Diffusion

We examine how liberalizing inheritance law can affect the diffusion of wealth beyond family dynasties. Exploiting a reform that reduced mandatory estate shares for children and surviving parents, we analyze testator responses in a unique dataset of 16,887 anonymous online wills. We find that greater testamentary freedom primarily benefited spouses and life partners but also led to significant increases in transfers to nonrelatives and charitable organizations. Our estimated “diffusion elasticity” reveals that one third of newly discretionary estate shares was reallocated towards heirs outside of the core family. Extrapolating this effect suggests that liberalization could generate additional annual extradynastic bequests of up to 1.2% of national income in countries with restrictive inheritance rules.