A survey recently released by Merrill Lynch’s Private Banking and Investment Group — How Much Should I Give to My Family? — shows that the #1 concern of wealthy parents is that the inheritances they plan to leave their children will do more harm than good.
Of the 206 high net worth parents surveyed, 91% said they plan to leave the lion’s share of their estate to their children. However, they expressed fear that giving too much would thwart their children from reaching their full potential.
Almost two-thirds of the parents surveyed said they were somewhat concerned that an inheritance would have a negative impact on their children, especially when large sums were distributed without guidance or accountability. Yet only 29% said they have had a conversation with their children about their future inheritances.
You don’t have to be wealthy to share these concerns. I have them for my own children regarding what my wife and I are planning to leave them. If you share some of these concerns too, I’d be happy to speak to you about when and how to leave your whole family wealth (not just your money) as part of a comprehensive legacy plan for your family so it doesn’t create trouble for your children.
Also consider that in some cases, the best time to leave an inheritance to the next generation may be while you are living – instead of waiting until death – because you can guide your children through the pitfalls of the inheritance.
For an example let’s look at the case of Norman and Stephen Brooks, father and son. Twenty years ago Stephen came to Norman and asked him to support him to build a business that would bring youth to Costa Rica, and together they created a tour business and multi-property development that is now thriving.
Stephen couldn’t have done it on his own. And while Norman could have waited to pass Stephen’s inheritance to him until his death, Norman would have lost the opportunity to see that inheritance grow, not just financially, but on so many other levels as well.
Today, Norman’s inheritance to Stephen is far bigger than anything he would have left at his death and both Stephen and Norman are benefiting from it greatly.
The only thing I would have recommended that Norman do differently would be to have given Stephen his living inheritance through a trust, rather than outright.
As things stand now, everything Stephen has created is in his own name remains at risk from creditors, predators, lawsuits, and divorce. If they could go back and change anything, I would recommend Norman set all that up for Stephen in a trust, providing airtight asset protection that Stephen cannot provide for himself.
With inheritance, there is a fine line between enabling our children and providing them with opportunities. But with proper planning, you can absolutely make a safe, successful transfer of wealth to the next generation which will do them much more good than harm.