How to Preserve a Fortune: An Experimental Comparison of Foundations and Direct Transfers to the Heir

Direct transfers allow heirs to freely use what has been passed on to them. Bequeathers who do not trust their descendants to make proper use of the fortune may prefer investing it in a safe foundation, thereby limiting their descendants’ autonomy. In our study we compare experimentally these two institutional arrangements. Although bequeather and descendant have specific personal interests, they agree in their concern for preserving the fortune. Our results show that bequeathers tend to trust their descendant. When transfers to the descendant are less efficient than investments in a foundation, due to, e.g., inheritance taxation, overall bequests decrease significantly.

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Authors:	Güth, Werner ; Koschmieder, Kurt-Dieter ; Levati, Maria Vittoria ; Martin, Ev
Institutions:	Max-Planck-Institut zur Erforschung von Wirtschaftssystemen <Jena> / Abteilung Strategische Interaktion
Subject:	Experiment \| Experiments \| Spieltheorie \| game theory \| Rentabilität \| tax subsidies \| Erbschaft \| Treuhand \| trust

1 Introduction
2 The Game
3 Experimental Procedures and Parameters
4 Experimental Results
5 Conclusions

Persistent link: https://www.econbiz.de/10005866700