The Impact of Race and Inherited Wealth on Social Mobility

Palma Joy Strand, Inheriting Inequality: Wealth, Race and the Laws of Succession, 89 Oregon L. Rev. 453 (2010), available at SSRN.

In her recent article, Inheriting Inequality: Wealth, Race and the Laws of Succession, Palma Joy Strand unpacks the connection between social mobility and inherited wealth.  She situates this discussion within the broader picture of the increasing gap between rich and poor in the United States.  Strand isolates the role of race in that trend and she argues that the transmission of inherited wealth, as much if not more than income levels, is a dominant predictor of whether a family will move between classes in American society.  Her goal is to develop a theory of the relationship between inheritance and the reproduction of our economic structure.  It is an ambitious goal and Strand makes substantial steps toward it in this article.

Strand first presents the data on the increasing inequality of overall wealth accumulation in this country, noting the distinction between “income” and “wealth.” She defines the former as the inflow of resources over time offset by outflows to cover expenses and the latter as accumulated assets most often accrued within the family.  Strand cites sociologist Seymour Spilerman for the proposition that “even modest levels of wealth have the ability to “cushion” families, particularly low-income families from economic shocks such as illness or job loss” and that wealth levels are correlated with educational achievement and well-being.  With this data, Strand lays the foundation for her argument that we must reform inheritance laws because they have a disparately negative impact on the accumulation of wealth in certain kinds of families.

After noting that wealth inequality in the United States is substantially greater than in most developed countries (as is income inequality), Strand then cites research that establishes the skewed distribution of wealth is most stark when looked at through a racial lens. While income inequality is striking as between blacks and whites, the differences in accumulated wealth are even more skewed. For example, 65.6% of white compared to 41.6% of black households had home equity and of those households, the median value of the asset was $45,000 for whites and $31,000 for blacks.  Institutional discrimination in housing, including more limited access to credit, higher interest rates on mortgages and lower rates of appreciation for housing in black neighborhoods, explains much of this disparity.

Strand then identifies the role of inheritance in wealth inequality.  She notes that if one fails to make a will, intestate succession passes property through the probate process to close family members.  In addition, much wealth is transmitted through nonprobate vehicles like joint tenancy, life insurance, payable on death accounts – all of which require that the decedent take action to use these vehicles.  These facially neutral rules appear to operate without regard to race or class.  But Strand makes the argument that they have a disparate impact on those who are working or lower-middle class and particularly those who are black within those categories.  Strand again provides empirical research to support her argument, citing statistics on inheritance that she argues demonstrate a strong racial skew.

Strand pointedly reminds the reader of what she calls “the genesis of race.”  She cites historian Theodore Allen for the proposition that race was a socially constructed category and the means to an end. “The creation of two classes of people with significantly different statuses based on their personal or ancestral origin – “race” – broke up burgeoning class solidarity that threatened to unite Euro- and African-American bond laborers against the ownership class in the late 1600s and early 1700s by attaching “Whites” of that class to the economic elite (all of whom were Euro-American) on the basis of common ancestry and carefully selected shared privileges.”  And members of the oppressed class that remained – African-Americans – were deprived of political and civil rights and denied access to literacy. Family rights and authority were displaced and– most importantly for purposes of Strand’s article – members of that oppressed class were not allowed to accumulate positive wealth.

Strand proffers two race-neutral paths to reverse the economic and social consequences of race in current inheritance patterns.  She acknowledges that solutions that included racial preferences would not likely pass constitutional muster.  The first approach addresses inheritance as windfall wealth and Strand characterizes this as approach as “addressing advantage.”  This proposal would tax inheritances as income in the hands of those who inherit the decedent’s assets.  The second proposal “addresses disadvantage” as Strand says and the goal is to preserve wealth among those who are at the low end of the income spectrum by acknowledging that a high proportion of such decedents die intestate and leave only a family home.  Strand embraces the reform proposals put forward by Heather Way in Way’s article Informed Homeownership in the United States and the Law, 29 St. Louis U. Pub. L. Rev. 113 (2009) and suggests that American inheritance law include the authority to preserve the family home for the actual occupant rather than heirs who may have little, if any, connection to the home. Refusing to allow fractional interests to pass by intestacy preserves the home as both shelter and as an asset that might be used to finance education or protect the health of family members who actually occupy the home, often younger generations.

These proposals are provocative.  The reader may disagree with them substantively or because they seem politically unrealistic in the current environment. But Strand has made a significant contribution to the literature by identifying and providing empirical support for the disparate impact of what appear to be race and class neutral policies embedded in our inheritance laws.   This is not a topic that has been widely discussed in the literature. As social mobility stagnates in this country, a clear-eyed assessment of the nexus between such mobility and inheritance is an important step in thinking broadly about whether our current inheritance paradigm is consistent with our values as a nation.