Giving during your lifetime or leaving an inheritance: what does it do to the recipient?

A large inheritance increases the chance that the recipient will work less or stop earlier. Economists call this the Carnegie effect, after the American industrialist Andrew Carnegie, who claimed this more than a century ago. Research in the United States, Norway, Sweden and Germany confirms it. For business owners the same money often works the other way: it gives their business breathing space. How much money arrives, when it arrives and whether the recipient expects it therefore help determine what it does.

About the research: most studies look at inheritances, and not at gifts during the giver's lifetime. What this article says about giving follows from what the research shows about the size of the amount, the timing and the expectation. The amounts in the studies are in the currency and year of the research.

In this article

1. Do people work less when they receive an inheritance?
2. Does the Carnegie effect also apply in Europe?
3. Do older heirs retire earlier?
4. Does an inheritance work differently for business owners?
5. How much can you give or leave free of tax in 2026?
6. What does the research mean for the choice between giving and bequeathing?

Do people work less when they receive an inheritance?

Yes, especially with large amounts. The larger the inheritance, the greater the chance that the recipient stops working or works less. Economists call this the Carnegie effect: the idea that inherited money weakens the incentive to work.

The best-known evidence comes from the United States. Researchers linked more than 4,300 tax returns of heirs to the estate tax returns of people who died in 1982. This let them see who stopped working between 1982 and 1985. Among single people with an inheritance below $25,000, that was 4.6%. With an inheritance above $150,000 it was 18.2%, almost four times as often (Holtz-Eakin, Joulfaian & Rosen, 1993).

The effect also applies to families. Households with an inheritance above $150,000 stopped working altogether about three times as often as households with less than $25,000. Those who kept working saw their earnings grow more slowly. According to the researchers, this suggests that heirs also worked fewer hours (Holtz-Eakin, Joulfaian & Rosen, 1992).

Does the Carnegie effect also apply in Europe?

Yes. Studies using data on the entire population in Norway and Sweden find the same pattern. In Norway, recipients of large inheritances worked clearly less. How much less depended on the size of the amount, the age of the recipient and whether they were entitled to other benefits (Bø, Halvorsen & Thoresen, 2019).

In Sweden, researchers followed people who inherited in 2004, from 2000 to 2008. The more someone inherited, the lower their income from work in the years that followed. That effect was stronger for older than for younger heirs. Income from capital rose instead, but that rise faded after a few years (Elinder, Erixson & Ohlsson, 2012).

In Germany it was mainly women who worked less after an inheritance. They worked full-time less often, and their desired and actual working week fell by 1 to 2 hours on average. The effect was larger in households without children and in households that found it hard to borrow (Doorley & Pestel, 2020).

Do older heirs retire earlier?

Yes, especially when the inheritance comes unexpectedly. An American study among older workers found that an inheritance goes together with a clearly higher chance of retiring. That link was strongest when the recipient had not seen the inheritance coming (Brown, Coile & Weisbenner, 2010).

So expectation plays a role, sometimes even before any money arrives. Swedish research found indications that heirs already adjusted their income from work before they received the inheritance (Elinder, Erixson & Ohlsson, 2012). Those who know that money will come later can adjust their plans to it earlier.

In the Netherlands, an inheritance from parents usually arrives late in the recipient's life. Statistics Netherlands (CBS) followed more than 30,500 children of parents born between 1936 and 1945 who died in 2018. Of them, 31% received an inheritance known to the Dutch Tax Administration. The median inheritance, the middle amount if you put all inheritances in order, was €43,000 net (CBS, 2026). The children of parents from those years are usually well into their own careers.

Does an inheritance work differently for business owners?

Yes. For business owners, an inheritance is often not a reason to stop, but a buffer to keep going. Extra money of your own helps a business survive when borrowing is difficult. Economists call this a liquidity constraint: you cannot borrow as much as your business actually needs.

The same American researchers looked at sole proprietors who received an inheritance. An inheritance of $150,000 raised the chance that someone remained a business owner by 1.3 percentage points. Businesses that survived saw their revenue rise by almost 20% (Holtz-Eakin, Joulfaian & Rosen, 1994). According to the researchers, this shows that a lack of credit otherwise holds businesses back.

Other research points the same way. People who ever received an inheritance or gift are more often self-employed. People who want to start a business name raising starting capital as their biggest problem themselves (Blanchflower & Oswald, 1998).

This is an association and not a guarantee. Inheriting money does not automatically make someone a better business owner. But the research does show that money of your own helps most where a bank will not or cannot provide finance. For a business owner, a gift at the right moment can therefore mean something different than for an employee.

How much can you give or leave free of tax in 2026?

In 2026 you may give your child €6,908 a year free of Dutch gift tax. If your child is between 18 and 40, you may give €33,129 once free of tax, or €69,009 for an expensive study. Someone other than a parent may give €2,769 a year free of tax (Belastingdienst, 2026).

The one-off exemption (the amount on which the recipient pays no tax) replaces the annual exemption in that year. The separate exemption for a gift towards your own home no longer exists since 1 January 2024. The child may still spend the one-off €33,129 on a home (Belastingdienst, 2026).

With an inheritance, a child has an exemption of €26,230 in 2026. A partner has an exemption of €828,035 (Belastingdienst, 2026). On anything above that, partners and children pay 10% up to €158,669 and 20% on the part above it. Grandchildren pay 18% and 36%, other recipients 30% and 40%. These rates apply to both inheritance tax and gift tax.

Because the annual exemption returns every year, the tax-free amount adds up over several years. Giving one child the annual amount for ten years means, at the same amounts, almost €70,000 free of tax. With an inheritance, the child receives the €26,230 exemption only once.

What does the research mean for the choice between giving and bequeathing?

The research gives no ready-made answer, but it does offer three lessons. The first is that size matters. Small amounts change little about how someone works. Large amounts clearly increase the chance of working less or stopping (Bø, Halvorsen & Thoresen, 2019).

The second lesson is that timing matters. In Sweden, the effect on work was stronger for older heirs (Elinder, Erixson & Ohlsson, 2012). Money that arrives earlier in life more often coincides with the stage in which someone starts or builds a business. That is exactly where money of your own helps a business survive (Holtz-Eakin, Joulfaian & Rosen, 1994).

The third lesson is that expectation matters. In American research, an unexpected inheritance was more strongly linked to stopping work than an expected one (Brown, Coile & Weisbenner, 2010). The less the money comes as a surprise, the smaller, according to this research, the chance of a sudden step out of work.

These are averages from research abroad. The CBS study mentioned above looked at housing and moving, and not at work. What a gift or inheritance does to your child depends on the person, the amount and the plans they already have.

Sources

• Holtz-Eakin, D., Joulfaian, D. & Rosen, H.S. (1993). The Carnegie conjecture: some empirical evidence. The Quarterly Journal of Economics, 108(2), 413–435. doi.org/10.2307/2118337
• Holtz-Eakin, D., Joulfaian, D. & Rosen, H.S. (1992). The Carnegie conjecture: some empirical evidence. NBER Working Paper 4118, working paper version with table 1 and the figures for families. nber.org
• Bø, E.E., Halvorsen, E. & Thoresen, T.O. (2019). Heterogeneity of the Carnegie effect. Journal of Human Resources, 54(3), 726–759. doi.org/10.3368/jhr.54.3.0915.7366R1
• Elinder, M., Erixson, O. & Ohlsson, H. (2012). The impact of inheritances on heirs' labor and capital income. The B.E. Journal of Economic Analysis & Policy, 12(1). doi.org/10.1515/1935-1682.3324
• Doorley, K. & Pestel, N. (2020). Labour supply after inheritances and the role of expectations. Oxford Bulletin of Economics and Statistics, 82(4), 843–863. doi.org/10.1111/obes.12353
• Brown, J.R., Coile, C.C. & Weisbenner, S.J. (2010). The effect of inheritance receipt on retirement. The Review of Economics and Statistics, 92(2), 425–434. doi.org/10.1162/rest.2010.11182
• CBS (2026). Mensen met grote erfenis verhuizen vaker en investeren meer in woning (People with a large inheritance move more often and invest more in their home), 28 September 2026. cbs.nl
• Holtz-Eakin, D., Joulfaian, D. & Rosen, H.S. (1994). Sticking it out: entrepreneurial survival and liquidity constraints. Journal of Political Economy, 102(1), 53–75. Figures from the abstract of NBER Working Paper 4494 (1993). doi.org/10.1086/261921 and nber.org
• Blanchflower, D.G. & Oswald, A.J. (1998). What makes an entrepreneur? Journal of Labor Economics, 16(1), 26–60. doi.org/10.1086/209881
• Belastingdienst (Dutch Tax Administration). Tot welk bedrag is een schenking belastingvrij in 2026? (Up to what amount is a gift tax-free in 2026?) Accessed 14 October 2026. belastingdienst.nl
• Belastingdienst (Dutch Tax Administration). Hoeveel vrijstelling heb ik in 2026 voor de erfbelasting? (What is my inheritance tax exemption in 2026?) Accessed 14 October 2026. belastingdienst.nl
• Belastingdienst (Dutch Tax Administration). Inheritance tax rates 2026 and gift tax rates 2026. Accessed 14 October 2026. inheritance tax and gift tax